Chapter 1, Problem 1.1LO

To determine

The concept of economics and to identify the differences between microeconomics & macroeconomics.

Explanation of Solution

Economics is a study of the general productivity, consumption and transfer of wealth considered in a micro & macro levels. The main difference in between the micro & macro economics is that the Micro economics is a study of economics at an individual level while the Macro economics is a study of the national economy as a whole. For example Micro economics will consider individual firm decision or the individual decision while studying the specific studies such as rise/fall in consumer goods. While the macroeconomics takes into the consideration aggregate repercussion on the economy due to the cumulative effect of the many firms or people.

Other examples for microeconomic analysis would include.

• the effects of changes in the price of gasoline relative to that of other energy sources.
• the effects of new taxes on a specific product or industry.
• If the government establishes new health care regulations, how individual firms and consumers would react to those regulations
• The effects of higher wages brought about by an effective union strike

In contrast, macroeconomic analysis would include issues such as.

• the rate of inflation, the amount of unemployment
• the yearly growth in the output of goods and services in the nation

Economics Concept Introduction

Introduction:

Economics: Economics is the study of how people allocate their limited resources to satisfy their unlimited wants. In other words, it is a branch of knowledge which determines and establishes a concrete evidences for the research in the production, consumption and the transfer of wealth.

Micro Economics: It is study of the single unit or concerned with single factors such as individuals (or households) and by firms. It only considers a study of individual decisions and its impacts.

Macro Economics: It is the study of the behavior of the economy as a whole, including such phenomena as changes in unemployment, the general price level, and national income.