As an economist, you have been asked to write a letter to a meeting of international professionals to explain the differences between microeconomics and macroeconomics and to provide real-world examples. Please write a letter of 4-6 pages including, but not limited to the following:
- the main differences between microeconomics and macroeconomics
- an example of each phenomenon
- a description of a microeconomic decision you made, and the factors that contributed to your decision
- a description of a specific macroeconomic phenomenon or event and how it has impacted you
The main differences between microeconomics and macroeconomics:
Macroeconomics can best be described as the study of the large aggregates of the economy or the economy as a whole. Microeconomics is the study of the economic variables affecting individual unit in an economy. Hence Microeconomics is the study of economics from a more individual point of view (ex: cost factors affecting firm) and how economy affects people in their daily lives. Macroeconomics is economics from a 'big picture' perspective, such as how our country's economy affects the world as a whole, etc. (snippets, 2010)
Macroeconomics is the study of large groups and deals with the problems related to the government or aggregate in nature. Example National Income Whereas microeconomics focus on small groups, households and business man. Example Demand of a Iphones
An example of each phenomenon:
The concept of elasticity is intended to measure the degree of responsiveness of a buyer or seller to a change in a key determinant, in particular price. Hence say price elasticity of IPhone relates to microeconomics because it's concerned with a particular demand of goods or services. It's not so much related to aggregate of goods. Price elasticity varies with the nature of goods/services and hence it is the part of microeconomics.
Aggregate demand in general refers to total spending by households, businesses, governments, and foreigners on domestically produced final goods and services. Note that in macroeconomics, the amount of domestically produced final goods and services or real output is equal to real income. This is ...