Report On Microeconomics and Macroeconomics: Reshmy Raphy - 1150100545 - Sec B - SPA Vijayawada
Report On Microeconomics and Macroeconomics: Reshmy Raphy - 1150100545 - Sec B - SPA Vijayawada
Report On Microeconomics and Macroeconomics: Reshmy Raphy - 1150100545 - Sec B - SPA Vijayawada
The term macro means large. Thus macroeconomics is concerned with the
economy as a whole entity and deals with generic problems of the economy like
inflation, poverty etc. Macroeconomics is the study of aggregates and concludes
the general effect on the economy as a whole, due to the summed up changes of
various processes determining the state of the economy.
The term micro means small. Hence microeconomics focuses on individual building
blocks of the economy. The subject matter here is concerned with the individual
units in an economy, like the market demand for the particular product. It applies
economic concepts at the smallest levels of the economy and as a result,
increases our understanding of the functioning of an economy.
For example, it deals with the price of a commodity, supply of a product etc. These
two forces govern all the processes that microeconomic theory deals with. It
assumes that all macroeconomic variables like national income, savings, etc are
constant. The most important tools in the microeconomic toolbox are – demand
and supply.
What to produce
Resources are scarce in nature and they also have various alternate uses. Hence
an economy needs to decide the wants that it needs to fulfil and in this process
allocate the resources for the fulfilment of the chosen wants. When an economy
decides to allocate a resource towards one want, it does so by sacrificing another
want, that is, it chooses between various alternates for the ultimate goal of
maximum satisfaction.
More of one good generally means less of other good. After it selects the
commodities to be produced, the economy has to further decide the quantity in
which the chosen good have to be produced.
How to produce
This problem is focused on the selection of people for whom goods and services
should be produced ( who will ultimately consume the produced commodities). This
problem is concerned with the distribution of income among the factors of
production.
MACROECONOMICS
Macroeconomics takes the larger aspect of economics on its back. It is the study of
economics in regard to aggregates of an economy. It is the part of economic theory
that conceptualises the behaviour of aggregates of the economy and considers
macro-phenomenon triggered by collective units of an economy.
MICROECONOMICS
What determines the products, and how many of each, a firm will produce and sell?
What determines what prices a firm will charge? What determines how a firm will
produce its products? What determines how many workers it will hire? How will a
firm finance its business? When will a firm decide to expand, downsize, or even
close? In the microeconomic part of this book, we will learn about the theory of
consumer behaviour and the theory of the firm.
Macroeconomics vs Microeconomics
It can be easily observed that micro and macroeconomics differ on the application
of economic theory to two different scales. Despite all these differences, both of
these are not mutually exclusive of each other. Macroeconomics is the aggregation
of economic behaviour by individual units. Microeconomic aspects can change with
changes in macroeconomic aspects and vice versa.
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