Microeconomics vs Macroeconomics: A Simple Guide
This textbook is extremely well written and clearly explains the topics offered. Education resources such as these texts are way of bridging the gap between the divided world. Especially texts on Economics can be used to do this bridging very well. I would use many examples from around the world in my classes of Macro and Micro Economics.
Macroeconomics may be defined as that branch of economic analysis which studies the behaviour of not one particular unit, but of all the units combined together. Microeconomics may be defined as that branch of economic analysis which studies the economic behaviour of the individual unit, maybe a person, a particular household, or a particular firm. There is, of course, the concept of a Robinson Crusoe Economy where the country has just a single person performing all the economic activities by himself. The name is borrowed from the title of a book by Daniel Defoe about a man shipwrecked on an island. But this is merely an analytical tool to facilitate the understanding of the complex reality of an actual economy.
Theory of Income Distribution:
While the equilibrium of the firm is attached with “Minimization of Costs” or “Maximization of Output”. It is examined how he satisfies his multiple ends with his scarce means e.g., https://1investing.in/ why consumers purchase goods and which factors influence their decisions. In other words, theory of utility, concepts of demand and elasticity of demand are studied in it.
- Land, labour, capital and entrepreneur are all factors of production and contribute to the process of production.
- Fundamental and value investors may disagree with technical investors about the proper role of economic analysis.
- A firm can get maximum profit when marginal revenue is more than marginal cost.
Tables like table 1.2 can be culturally sensitive especially in an era where trade wars and controversies are happening with this country. The text is easily and readily divisible into smaller reading sections that can be assigned at different points within the course (i.e., enormous blocks of text without subheadings should be avoided). The text should not be overly self-referential, and should be easily reorganized and realigned with various subunits of a course without presenting much disruption to the reader. The text covers several relevant topics that are presented in a logical, and clear fashion.
Generally the text will not become obsolete in a short period of time yet the authors will need to either update the data within the text or provide updated links to the already numerous web sites referred to within the text. I found the text easy to read and interesting, well organized in a logical order. Hyperlinks to different websites where examples came from are provided for further reading. Very well demarcated into modules for easy reading and understanding.
The base content is up-to-date and in general the content taught in a standard principles class will not change frequently. Some of the examples and policy applications are somewhat out-of-date. For example, one example concerns Netflix charging for streaming and DVD rentals, which most college students won’t really connect with as they don’t consume DVDs anymore. Any economics textbook will have to deal with this dilemma and new editions and updates are straightforward; however, this book may be out of date within two or three years.
Scope And Purpose Of Microeconomics And Its Significance In Business Decision Making
Also join our Facebook Group “Economics Students Society” to stay connected with us and receive different knowledgeable material uploaded on Page. The text is very consistent in using the same terms and framework through all the chapters. It can compete on an equal footing with textbooks offered by traditional commercial publishers. The book is relevant today and I believe it will be relevant long term. The text is free of significant interface issues, including navigation problems, distortion of images/charts, and any other display features that may distract or confuse the reader. Principles of Economics is free of significant interface issues, including navigation problems, distortion of images (or charts), and any other display features that may distract or confuse the reader.
Theory of Consumer Behavior
Microeconomics is concerned with the economic activities of such economic units as consumers, resource Owners and business firms. Understanding microeconomics helps in effectively researching and promoting products. Research is useful in investigating potential customer demand and in developing products that best match desired benefits.
On the consumer side, their efforts include rigorous mathematical modeling of utility that incorporates altruism, habit formation, and other behavioral influences on decision making. Consumers and firms interact with each other across several markets. One such market is the goods market, in which firms make up the supply side and consumers who buy their products make up the demand side. Different goods market structures require microeconomists to adopt different modeling strategies. For example, a firm operating as a monopoly will face different constraints than a firm operating with many competitors in a competitive market.
The higher your prices, the lower the size of the population who will buy them. However, if you offer lower prices than the market demand dictates, you leave money on the table and you might also end up with shortages of your product or services. This can cause customer alienation and negatively affect the business in the long term.
Neoclassicals believe in constructing measurable hypotheses about economic events, then using empirical evidence to see which hypotheses work best. In this way, they follow in the “logical positivism” or “logical empiricism” branch of philosophy. Microeconomics applies a range of research methods, depending on the question being studied and the behaviors involved. Competition acts as a regulatory mechanism for market systems, with government providing regulations where the market cannot be expected to regulate itself. Regulations help to mitigate negative externalities of goods and services when the private equilibrium of the market does not match the social equilibrium. Price theory focuses on how agents respond to prices, but its framework can be applied to a wide variety of socioeconomic issues that might not seem to involve prices at first glance.
Macroeconomics analyzes how an increase or decrease in net exports impacts a nation’s capital account, or how gross domestic product (GDP) is impacted by the unemployment rate. (iii) By setting up production units in remote areas to employ labour at notoriously low wage rate. Microeconomics is concerned with study of parts but not the whole. In terms of individual terms, it is impossible to describe large and complex universe of facts like economic system. It also helps entrepreneurs to achieve optimum production point with their budget constraint.
Principles of Economics is up-to-date since it tackles several current economic topics such as environmental protection, poverty, inequality, healthcare, race, gender, immigration, among others. In future editions, I think topics such as protests, (social) justice, political polarization, pandemics (vaccines), and the future of the green economy might be useful for our undergraduate students. The text is written in such a way that it will not be tedious to implement such updates. Economic concepts are used to analyse the utilisation and depletion of natural resources.
Useful in business decision-making
Because the cost of not eating the chocolate is higher than the benefits of eating the waffles, it makes no sense to choose waffles. Of course, if one chooses chocolate, they are still faced with the opportunity cost of giving up having waffles. But one is willing to do that because the waffle’s opportunity cost is lower than the benefits of the chocolate. Opportunity costs are unavoidable constraints on behaviour because one has to decide what’s best and give up the next-best alternative.
The branch of microeconomics that deals with firm behaviour is called producer theory. Producer theory views firms as entities that turn inputs—such as capital, land, and labour—into output by using a certain level of technology. Input prices and availability, as well as the level of production technology, bind firms to a certain production capacity. The goal of the firm is to produce the amount of output that maximizes its profits, subject to its input and technology constraints. Microeconomics is the study of what is likely to happen (tendencies) when individuals make choices in response to changes in incentives, prices, resources, and/or methods of production. Microeconomics is the social science that studies the implications of incentives and decisions, specifically how those affect the utilization and distribution of resources.