Theories which explain market price determination are called price theories and are one of the vital components of microeconomics. Hence, microeconomics is also known as price theory.

Micro economics is also known as Price Theory because it primarily focuses on the determination of prices of goods and services in the market. It analyzes the behavior of individual consumers, firms, and industries and how they interact in the market.

The following are the key points that explain why micro economics is also known as Price Theory:

1. Study of individual behavior: Micro economics deals with the study of individual behavior of consumers and producers in the market. It analyzes how consumers make choices based on their preferences, income, and budget constraints. It also examines the decision-making process of firms regarding production, pricing, and resource allocation.

2. Market equilibrium: Micro economics analyzes the market equilibrium, which is the point where the demand and supply curves intersect. At this point, the price and quantity of goods and services are determined. Micro economics examines how changes in demand and supply affect the market equilibrium.

3. Price determination: Micro economics is concerned with the determination of prices of goods and services in the market. It examines the factors that influence the prices of goods and services, such as input prices, technology, competition, and government regulations.

4. Resource allocation: Micro economics examines how resources are allocated among different industries and firms based on their relative prices. It analyzes the production decisions of firms and how they allocate their resources to produce goods and services.

In conclusion, micro economics is also known as Price Theory because it deals with the determination of prices of goods and services in the market. It analyzes the behavior of individual consumers, firms, and industries and how they interact in the market.

Price theory