Economics. Microeconomics vs. Macroeconomics

1. What is economics?

There are many various opinions concerning economics, but, in general, economics is the systematic study of choosing which goods and services will be produced and consumed to satisfy society’s wants.

2. Why is economics considered a social science?

Economics is a social science since it involves interactions among members of society. Economics studies the behaviour of people in producing, distributing, exchanging, and consuming goods and services. Understanding economic behaviour and the ways in which economic activity is organized and coordinated are at the heart of economics.

3. What is microeconomics?

Microeconomics is the study of individual consumers and business firms who make choices on such matters as what to buy and what to sell, how much to work and how much to pay, how much to borrow and how much to save.

4. What does microeconomics focus on?

Microeconomics focuses on how individuals and firms behave, how they interact in the market place, and how these interactions establish a price and allocate scarce resources.

5. Why does microeconomics trace cause-and-effect relationships?

Because microeconomics is not used to determine how a specific individual will act, since it examines how an “average” individual will probably behave under a specific set of conditions. It traces cause-and-effect relationships that influence choices of individuals, businesses and society and is concerned with issues such as scarcity, choice and opportunity costs, and with production and consumption.

6. What economic issues does microeconomics do with?

Microeconomics do with individual consumers and business firms who make choices on such matters as what to buy and what to sell, how much to work and how much to pay, how much to borrow and how much to save. Microeconomics focuses on how individuals and firms behave, how they interact in the market place, and how these interactions establish a price and allocate scarce resources.

7. What is macroeconomics?

Macroeconomics is the study of the economy as a whole. Macroeconomics seeks solutions to macroeconomic problems such as how fast the economy is developing, how employment can be increased, what can be done to increase the overall output of goods and services, how much total income is, how inflation will effect economic growth and how different governmental policies can be used to stabilize the level of business activity in the economy.

8. What economic issues does macroeconomics look at?

Macroeconomics looks at macroeconomic problems such as how fast the economy is developing, how employment can be increased, what can be done to increase the overall output of goods and services, how much total income is, how inflation will effect economic growth and how different governmental policies can be used to stabilize the level of business activity in the economy.

Macroeconomics also looks into the total effect of individual choices on the overall productive efficiency of the economy reflected by such economic indicators as the nation’s price level, total output, and level of employment.

9. Why does macroeconomics look into the total effect of individual choices?

Because macroeconomics is the study of the economy as a whole. Macroeconomics concentrates on determining the overall effect of decisions made in the system. Just as the whole consists of the sum of its parts, the economy is ultimately driven by individual choices.

10. What are two worlds that economists deal with?

Everyone should realize that economists deal with two worlds: the “world that is”, and the “world that ought to be”. Positive economics looks at the facts and the economy as they actually are and it is an approach that deals with “what is”. Normative economics, on the other hand, is concerned about what ought to be.

11. What is an economic model?

Is any simplified statement, diagram or formula used to understand economic events.

12. What do economists use to explain or describe the “world that is”?

Positive economics looks at the facts and the economy as they actually are, avoiding value judgements and attempting to seek scientific bases about economic activities. It is an approach that deals with “what is” rather than with “what ought to be” and includes no indication of approval or disapproval.

13. Why do economists make the positive-normative distinction?

To the economists the positive-normative distinction is useful because it helps people with very different views about what is desirable to communicate with each other. Since most assertions are not easily classified as purely positive or purely normative statements, they must be combined to make a good policy statement. One must decide what goals are desirable (the normative part), and choose a way of attaining those goals (the positive part).