This paper represents the most effective automatic power factor improvement by using static capacitors which will be controlled by a Microcontroller with very low cost although many existing systems are present which are expensive and difficult to manufacture. In this study, many small rating capacitors are connected in parallel and a reference power factor is set as standard value into the microcontroller IC. Suitable number of static capacitors is automatically connected according to the instruction of the microcontroller to improve the power factor close to unity. Some tricks such as using resistors instead of potential transformer and using one of the most low cost microcontroller IC (ATmega8) which also reduce programming complexity that make it most economical system than any other controlling system.