![]() We also study the behaviour of the general price level as also the growth of the economy. We describe, analyse and explain the behaviour of large aggregates like total output (or gross national product), national income, total consumption, aggregate investment, the level of employment. In any macro-economic study we seek to analyse the behaviour of an economy in its totality. Thus, in macroeconomics we are concerned with certain broad aggregates. Similarly, a few million firms existing in the economy will be lumped together into something we call ‘the business sector’. In our study of macroeconomics, millions of households will be lumped together when we consider such topics as the importance of consumption spending, savings and employment. In macroeconomics, however, the markets are highly aggregated. Macroeconomics, like microeconomics, is concerned with incentives, prices, and output. On the other hand, macroeconomics focuses on how the aggregation of individual micro-units affects our analysis. Boulding, “Microeconomics is the study of particular firms, particular households, individual prices, wages, incomes of individual industries, and particular commodities.” Lerner put it, “Microeconomics consists of looking at the economy through a microscope, as it were, to see how the millions of cells in the body economic - the individuals or households as consumers, and the individuals or firms as producers - play their part in the working of the whole organisation”.Īccording to K. Analysis that focuses on a single consumer, producer, product or productive resources is referred to as micro-economics”.Īs A. In the language of Gwartney and Stroup, “since individual human decision makers are the moving force behind all economic action, the foundations of economics are clearly rooted in a micro-view. The focus is on a particular market or a very small segment of the economy. In microeconomics we study the optimisation goal(s) of an individual consumer or a single business firm. ![]() This maximisation or minimisation goes by the name optimisation. ![]() This ‘something’ is utility in case of a consumer, profit or loss in case of a business firm (private) and factor income (such as wage income) in case of a factor owner. ![]() Each such micro (small) unit seeks to maximise or minimise something. Thus, in microeconomics the focus is on individual economic units such as individual consumer or an individual firm or an individual factor owner. Likewise the term macroeconomics is derived from the Greek word Makros, which means ‘large’. The term microeconomics is derived from the Greek word Mikros which means ‘small’. It also seeks to identify determinants of the levels of national income and output, employment and prices. Macroeconomic analysis investigates how the economy as a whole functions. Keynes’ General Theory (1936) is the first full-scale treatise on macroeconomics. In contrast, macroeconomics is the branch of economics concerned with the study of aggregate economic activity. ![]()
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