Micro Economic Theory Essay Example | Topics and Well Written Essays - 1750 words

Micro Economic Theory - Essay Example This essay stresses that hence microeconomic theory is relevant in the case of flat screen technology. It illustrates how important it is to carefully assess the short term and long term production possibilities and how they will be impacted by the financial factors listed above which could cause changes in demand and supply. Such changes, not only in terms of short term demand and supply but also in terms of aggregate long term demand and supply will impact upon the level of profits that can be expected. While some factors can be easily anticipated and provision made for them, long term changes cannot be so easily anticipated. The law of diminishing returns also begins to apply in terms of the demand and supply of the product. This paper makes a conclusion that microeconomic theory is important in that it enables the establishment of a certain level of foresight in making economic decisions and helps to predict with a reasonable degree of accuracy how the factors of demand an supply are likely to impact upon profit maximization of a product and this a company can plan its long term production output on this bases. For example, the production of flat screen technology instruments must take into account, the factor of entry of foreign imitators of the product, glut in production of the product due to other companies joining in what appears to be a financially lucrative product and the impact of such production gluts upon demand and supply of the product.