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What is economics? There are two economists define different meaning of the word “Economics”. Alfred Marshall (1890) noted that "Economics is the study of people in the ordinary business of life." Also Paul A. Samuelson (1948) noted that Economics is the "study of how societies use scarce resources to produce valuable commodities and distribute them among different people." Meanwhile, economics reflect the economic decision and choices of people on goods and services. Economics explains how people interact within markets to get what they want or achieve their goals. Since economics is a driving force of human interaction, it also shows the reasons of why people and governments behave in particular ways.
Generally, microeconomics and macroeconomics are basically two main branches of economics. Microeconomics focuses on the smaller entities (the individual unit); macroeconomics focuses on the larger entity (the aggregate). First of all, the definition of Microeconomics and Macroeconomics will be provided; then explain the differences between Microeconomics and Macroeconomics. The last but not least, the reason of why macroeconomists use microeconomic theory to guide them in their work, and why might they wish to do so will be discussed.
Microeconomics deals with the functioning and behavior of individual decision-making unit, such as business firms and households. These individual units affect the supply and demand for goods and services that determine the prices within economy. For example, how does a firm decide what to charge for its goods and services? The firm must make that decision. If the price is too high, people might not buy. If the price is too low, the firm cannot make a profit and will be forced to close down. If a large amount of people are demanding particular product or service, its price will tend to go up as that demand increases. If demand begins to fall, the price will go down. When a product or service is provided in excess, prices might have
Generally, microeconomics and macroeconomics are basically two main branches of economics. Microeconomics focuses on the smaller entities (the individual unit); macroeconomics focuses on the larger entity (the aggregate). First of all, the definition of Microeconomics and Macroeconomics will be provided; then explain the differences between Microeconomics and Macroeconomics. The last but not least, the reason of why macroeconomists use microeconomic theory to guide them in their work, and why might they wish to do so will be discussed.
Microeconomics deals with the functioning and behavior of individual decision-making unit, such as business firms and households. These individual units affect the supply and demand for goods and services that determine the prices within economy. For example, how does a firm decide what to charge for its goods and services? The firm must make that decision. If the price is too high, people might not buy. If the price is too low, the firm cannot make a profit and will be forced to close down. If a large amount of people are demanding particular product or service, its price will tend to go up as that demand increases. If demand begins to fall, the price will go down. When a product or service is provided in excess, prices might have
References: Alfred Marshall, 1890, Economist ‘Principles of economics; an introductory volume’ Jennifer VanBaren, 1999 – 2013, eHow Contributor ‘Five Differences between Macroeconomics and Microeconomics’ Paul A. Samuelson, 1948, Economist ‘Economics’, < http://www.aeaweb.org/students/WhatIsEconomics.php > [Accessed 13 May 2013] Robert A. Ristau (2000): Intro to Business – Business 2000, Annotated Instructor’s Edition, South-Western Thomson Leaning