 Microeconomics, microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the application of scarce resources and the interactions among these individuals and firms. One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results. Microeconomics stands in contrast to macroeconomics, which involves the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national policies relating to these issues. Microeconomics also deals with the effects of economic policies such as changing taxation levels on the aforementioned aspects of the economy. Particularly in the wake of the Lucas Critique, much of modern macroeconomic theory has been built upon microfoundationside.es.based upon basic assumptions about micro-level behavior.