University:
Loyola University Maryland
Course:
EC 102 | Microeconomic Principles
Academic year:

2024
Views:

446

Pages:

2
Author:

Natasya J.

Title : Microeconomics and Macroeconomics Course : Microeconomic Principles Many subjects are studied on various levels. Consider biology, for example. Molecular biologists study the chemical compounds that make up living things. Cellular biologists study cells, which are made up of many chemical compounds and, at the same time, are themselves the building blocks of living organisms. Evolutionary biologists study the many varieties of animals and plants and how species change gradually over the centuries. Economics is also studied on various levels. We can study the decisions of individual households and firms. Or we can study the interaction of households and firms in markets for specific goods and services. Or we can study the operation of the economy as a whole, which is the sum of the activities of all these decision makers in all these markets. The field of economics is traditionally divided into two broad subfields. Microeconomics is the study of how households and firms make decisions and how they interact in specific markets. Macroeconomics is the study of economy-wide phenomena. A microeconomist might study the effects of rent control on housing in New York City, the impact of foreign competition on the U.S. auto industry, or the effects of compulsory school attendance on workers’ earnings. A macroeconomist might study the effects of borrowing by the federal government, the changes over time in the economy’s rate of unemployment, or alternative policies to promote growth in national living standards. Microeconomics and macroeconomics are closely intertwined. Because changes in the overall economy arise from the decisions of millions of individuals, it is impossible to understand macroeconomic developments without considering the associated microeconomic decisions. For example, a macroeconomist might study the effect of a federal income tax cut on the overall production of goods and services. But to analyze this issue, he must consider how the tax cut affects households’ decisions about how much to spend on goods and services. Despite the inherent link between microeconomics and macroeconomics, the two fields are distinct. Because they address different questions, each field has its own set of models, which are often taught in separate courses. Microeconomics: The study of how households and firms make decisions and how they interact in markets. Macroeconomics: The study of economy wide phenomena, including inflation, unemployment, and economic growth