What is economics? Before we start to learn about economics, we have to understand that what is the different between macroeconomics and microeconomics.
Macroeconomics and microeconomics are the main branches of economics. Karl E. Case, Ray C. Fair and Sharon M. Oster : Principles of Economics, 10th ed. Global Edition, Chapter 1. And, I will describe that with examples. Microeconomics seems likes…. In this research we can differentiate macroeconomics microeconomics its relationship to the economy to serve both, we can also use them these two concepts…. Part Of. Introduction to Microeconomics.
Microeconomics vs. Supply and Demand Basics. Microeconomics Concepts. Economy Economics. Macroeconomics: An Overview Economics is divided into two categories: microeconomics and macroeconomics. Key Takeaways Microeconomics studies individuals and business decisions, while macroeconomics analyzes the decisions made by countries and governments. Microeconomics focuses on supply and demand, and other forces that determine price levels, making it a bottom-up approach.
Macroeconomics takes a top-down approach and looks at the economy as a whole, trying to determine its course and nature. Investors can use microeconomics in their investment decisions, while macroeconomics is an analytical tool mainly used to craft economic and fiscal policy. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.
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Microeconomics is the study of individual and business decisions regarding the allocation of resources and prices of goods and services. The term also considered taxes, regulations, and government legislation. Microeconomics has applications in trade, industrial organization and market structure, labor economics, public finance, and welfare economics.
Macroeconomics is the study of the decisions of countries and governments. The term analyzes entire industries and economics rather than individuals or specific companies.
Macroeconomics tries to determine the optimal rate of inflation and factors that may stimulate economic growth. For instance, macroeconomics may analyze how the unemployment rate affects the gross domestic product. Macroeconomics describes relationships among national income, savings, and overall price level. Another principle involves production theory, which explores how goods and services are created or manufactured. A third principle involves the costs of production, which ultimately determine the price of goods and services.
Finally, the principle of labor economics attempts to explain the relationship between wages, employment, and income. This can be modeled as a function of physical capital, human capital, labor force, and technology. Another key research area involves business cycles, an area of macroeconomics that considers variables like employment and national output.
The Great Depression of the s spurred the development of modern macroeconomic theory. In the s, economics was simply the study of how human societies managed the production, distribution, and consumption of goods and services. The concept essentially began with Adam Smith, a Scottish philosopher regarded as the father of economics, who authored The Wealth of Nations in Smith believed that an invisible hand guides individuals to maximize their well-being and provide the best overall result to society as a whole.
How micro- and macroeconomics affect business The law of supply and demand 19 Businesses use microeconomic principles to better understand the behavioural patterns of their consumers, in order to be successful and generate a profit. Start-ups 21 When starting a business, it is important to do extensive research into the industry you are interested in. Know where customer demand is, to better provide and develop the products and services that would best match the needs of your target market.
Investing in this microeconomic research can help you reach a competitive advantage to attract customers. Economic cycles 22 Macroeconomics is cyclic; just as positive influences and changes promote prosperity, higher demand levels may trigger price increases, which may, in turn, dampen the economy, as households adopt leaner budgets.
Then, when supply starts to outweigh demand, prices may go down again, leading to further prosperity, until the next cycle of economic supply and demand.
The cost of goods and services 23 Regardless of what a business produces, the goal is usually to keep costs down in order to improve profits. In microeconomic theory, companies run at the highest level of efficiency, with production decisions based on how the maximum output can be achieved with minimal extra costs.
So, for example, if production is ramped up, a need for extra labour may arise, resulting in the wage costs increasing, and a potential change in sales prices.
In microeconomics, the cost of labour is typically the highest expense of a business. The decided price of the product or service will impact on the number of people willing to buy it. Click here to view sources. Retrieved from Investopedia. Apr, Aug,
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