Households are the ultimate consumers of goods and services. Firms are the producers of capital and final goods and services. There is no assumption that government behaves in a consistent manner. Some models assume personal interests motivate elected officials. The distinction is a legal one whether the firms are owned privately or by the government.
Institutions are formal and informal ways of organizing human behavior.
In a market economy one of the most important institutions is the legal system. Microeconomics Microeconomics deals with the determination of prices and quantities in individual markets and the interrelationships among these markets. It deals with the details of a market economy. Individual consumers and producers make their private decisions in response to publicly known signals prices, wages, profits and these signals respond to the collective action that results from the sum of the decisions of individuals. Suppose consumers experience a change in tastes and want more large cars and fewer small cars.