In 2012, it is projected that the microeconomics activities around the world will focus closely on how competition channels affect outcomes in micro markets. This is because microeconomics around the world is based on decision making and it deals with issues of the effect of price increases of product relative to the price of another product (Schwartz, Carew & Maksimenko, 2010). Currently global firms are trying to maximize their profits by making the difference between total revenue and total cost as large as possible (Sexton, 2010). Studies indicate that, since many firms are experiencing a competitive labor market, the demand for labor is determined by its marginal revenue product, which is the additional revenue that a firm obtains from one more unit of input.
Structural transformation of the global economy has changed the nature of the distributional challenges hindering social cohesion. This means that balancing global microeconomic activities offers a huge promise for reducing inequality between countries and more importantly between individuals.
Currently, the United States and Europe are dealing with exceptional debt problems. On the other hand, many financial markets are on the down fall and recovery programs are being implemented all over the world. Global microeconomic activities are being affected by prices on basics commodities such as food and gas, which are soaring. The rising inflation rates in many developing countries are affecting the labor markets leading to job losses.
In a competitive market, microeconomic principles stipulate that consumers and producers buy and sell at the market equilibrium. Sexton (2010) says that as a result of the global recession some consumers are not willing and unable to pay more for the good than they have to. As a result the equilibrium price and quantity in competitive market maximize the economic welfare of consumers and producers. Maximizing total surplus has lead to an efficient allocation of resources. On the other hand, efficiency makes the size of the economic pie as large as possible. Sexton (2010) says that individual wage, which employees receive for their activities, inequality focuses narrowly on the remuneration on the labor market.
In the last 10 years, the distribution of wealth among people is certainly much more unequal than the distribution of wages, income or consumption. In other cases, wealth itself is the focus of redistribution policies through taxes on the value of property or other assets. Market incomes include income from wages and salaries, self employment, income, capital income and private pensions received by household members and tend to be the most unequally distributed of these three household living standard concepts (OECD, 2012). Disposable incomes are often less unequally distributed than market incomes, because they take into account cash transfers, public pensions and other benefits paid to the household, less than the taxes paid by the household. Consumption expenditure may be even more equally distributed, since it generally reflects disposable income less household savings to account for consumption smoothing.
It should be noted that as a result of high inflation rates, the microeconomic activities among consumers vary according to price differences across time and among countries. OECD says that at its simplest it can be thought of as a minimum subsistence living standard, below which individual are unable to survive (2012). For hundreds of millions of people around the world, exclusion at this level of basic subsistence is a reality. According to OECD, the microeconomic issues should be viewed from the emerging middle class in developing countries (2012). It is clear that in the vast majority of developing countries these middle strata do not yet constitute a middle class that can serve as a powerful engine of economic growth and development.
The African Development Bank (2011), labels household per capita living standard between $2 and $20 per day as middle class. OECD labels per capita subsistence between $10 and $100 per day as middle class in an attempt to make the definition universally comparable between both developing and developed countries. Schwartz, Carew & Maksimenko (2010) says that microeconomic theory formalizes basic principles concerning how best to resolve the tradeoffs involved in consumption, production, and other allocation decisions. The assumptions individually need not be perfect reflections of real world economic activity. As far as microeconomics is concerned, economic data is typically positive numbers; the unemployment rate, the inflation rate, the price of something, the quantity of something produced or sold among others (OECD, 2012).
In the recent past it has been noted that with adjustment costs, short-run responses to changing economic variables are only partial, and therefore, that demand and supply curves of various commodities in the global market are less elastic in the short run than in the long run (Schwartz, Carew & Maksimenko, 2010). Research shows that adjustments are difficult to make in the non frictionless world. When the price of gas at the pump triples in short order pain is felt widely throughout the economy.
When people face the hard economic situations as it was from 2008 to 2011, the important thing to a micro economist is that the pain gets people to respond in a myriad of ways that involve finding and using substitutes. These substitutes may include buying more fuel efficient cars, driving less, wear heavier sweater in the winter and invest in alternative energy sources. Through analyzing microeconomic activities around the world, policy makers should address equity issues and provide equality of opportunities for poor and marginalized populations to ensure continued microeconomic growth and development.
If the world can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, then the ultimate decisions must be left to the people who are familiar with these circumstances to make sound economic decisions (Schwartz, Carew & Maksimenko, 2010). The concept of cost in microeconomics is more than the dollar and cents that an individual shells out at the cash register. Every human activity must respond to costs in one way or another.