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The quantity of a service (factor) used in producing a commodity depends on the relationship between the prices of that service and other services, and on the prices of cheap case, commodities. Here producers meet labourers, capitalists, landlords and other resource-owners. In this market, money incomes are earned by essays resource-owners who own and buy essay online cheap mini luxury wars, sell their resources, the majority of whom are consumers. Thus microeconomics is a study of interacting units of consumers, producers, and resource-owners. In this system, all prices are relative to one another. A Heavy? A change in any one price establishes a ripple which touches both product and factor markets. The interrelation between product and factor markets through prices is shown in Figure 1. In this system, consumers and firms are linked through the product market where goods and services are bought and sold. They are also linked through the factor market where the factors of production are bought and sold. Buy Essay Case Luxury Wars? In the inner circle that consumers who are resource-owners sell productive resources in the factor market which are used by firms. The firms, in turn, produce goods and services which they sell in the product market to consumers.
The outer circle of the on training and development, figure shows that the consumers incur expenditure in buying goods and services from the product market. The money so received by buy essay mini case firms becomes their revenue or income which they spend in buying the services of consumers as suppliers’ productive resources in essay reviews, the factor market which, in turn, goes to consumers as their incomes. Thus microeconomics is the study of the interdependence of online mini case wars, commodity prices, factor prices, their demands and supplies and costs, in Dissertation, relation to individual consumers, firms and industries. Besides, microeconomics studies how efficiently the various resources are allocated to buy essay cheap luxury, individual consumers and producers within the economy. Efficiency in the allocation of resources is related to on training and development, the study of welfare economics. It involves the study of efficiency in consumption, efficiency in production and overall efficiency. Consumption and production efficiencies relate to individual welfare and overall efficiency to social welfare. An individual consumer’s welfare or efficiency is maximised when, with any reallocation of resources, he is made better off without making any other person worse off.
An individual producer achieves efficiency in production when, with any re-allocation of buy essay online case wars, resources in the production of a commodity, he is able to filipino thesis sample 2, increase its output without reducing the output of buy essay cheap case wars, some other commodity. Overall efficiency, also known as social welfare or Pareto optimality, relates to the overall improvement in the economic efficiency of the society whereby social welfare increases when with re-allocation of resources, society as a whole is made better off without making any individual worse off. Any re-allocation of resources at this optimum level of service,, efficiency will lead not only to overall economic inefficiency but also to individual consumers’ and buy essay cheap mini case wars, producers’ inefficiencies. Thus microeconomics studies welfare theory in its individual and aggregate aspects. We may conclude that microeconomics consists of the study of price theory, the theory of the individual household, the firm and industry, production theory and welfare theory. Essay # 3. Limitations of Microeconomics : Despite its uses, microeconomic analysis is not free from certain limitations. (1) It is based on the unrealistic assumption of full employment in the economy. “To assume full employment”, according to Keynes, “is to assume our difficulties away.” Full employment is not the rule but an exception in the real world. Thus microeconomics is an unrealistic method of examples of successful personal for graduate, economic analysis.
(2) Microeconomics is based on the assumption of laissez-faire. But the policy of laissez-faire is no longer practiced. It ended with the Great Depression of the 1930s. Buy Essay Online Mini Luxury? This makes the study unrealistic. (3) Microeconomics is concerned with the study of parts and neglects the whole. As pointed out by Boulding: “Description of a large and complex universe of facts like the economic system is impossible in terms of individual items.” Thus the study of microeconomics presents an imprecise picture of the economy. (4) Further, microeconomics is not only inadequate but also misleading in analysing several economic problems. It is not essential that principles which are true in the case of a particular household, firm or industry may also be correctly applicable to the economy as a whole. To quote Boulding again: “The character and behaviour of essay uk, aggregates cannot be…obtained simply by cheap case luxury wars generalizing from character and behaviour of the a heavy burden essay, individual components.” Essay # 4. Importance of Microeconomics: Microeconomics is an important method of buy essay online cheap case, economic analysis which Keynes regarded as “a necessary part of one’s apparatus of thought.” It has both theoretical and Dissertation on training and development, practical importance.
1. To Understand the Working of the case luxury, Economy: Microeconomics is of utmost importance in understanding the working of a free enterprise economy. In such economy there is tigers, no agency to plan and coordinate the working of the economic system. Such decisions as how to produce, what to produce, and for whom to produce, how to buy essay cheap mini luxury, distribute and written essays, what to buy essay mini case, consume are taken by producers and consumers without any extraneous force. It follows that the statements, planning authority in a centrally planned economy cannot ensure an efficient working of the economy in the absence of a free enterprise economy. Buy Essay Online Luxury Wars? As pointed out by Learner, “Microeconomics teaches us that completely “direct” running of the writing service, …, economy is impossible—that a modern economy is so complex that no central planning body can obtain all the information and give out all the buy essay online mini case, directives necessary for its efficient operation.” 2. To Provide Tools for Economic Policies: Microeconomics provides the Dissertation and development, analytical tools for evaluating the economic policies of the state. Price or market mechanism is the tool which helps us in this respect. In a mixed economy, the state runs certain public utilities like the postal services, railways, water, electricity etc. In such cases the governments—centre, state or local—fix prices on no-profit no-loss basis.
These prices, in turn, influence the prices of other goods and services. Online Mini Wars? There are also public enterprises which are run on price-profit policy. The prices of the articles manufactured by them affect the a heavy burden essay, price of buy essay cheap mini, various goods and services in the private sector of the essay tigers, economy. Some of the buy essay online cheap mini, public enterprises compete with private enterprises so their price policies are based on market mechanism. They cannot charge prices higher than under the private sector. Microeconomics helps the state in formulating correct price policies and in evaluating them in proper perspective. 3. Helpful in the Efficient Employment of Resources: Microeconomics deals with the economizing of scarce resources with efficiency.
The principal problem faced by modern governments is the allocation of resources among competing ends. In this sense, microeconomics is used by the government in the efficient employment of resources and achieving growth with stability. Microeconomics helps the business executive in essay tigers uk, the attainment of maximum productivity with existing resources. It is with its help that he is able to know the buy essay online mini wars, consumer demand and calculate the costs of his product. 5. Helpful in Understanding the Problems of Dissertation on training, Taxation: Microeconomics also helps in understanding some of the problems of taxation. It is used to online cheap wars, explain the welfare implications of a tax.
A tax leads to the reallocation of resources from their optimal level. Microeconomics helps in burden essay, explaining as to whether an cheap income tax leads to a diminution of uk, social welfare or an excise duty or sales tax. It is the imposition of an excise duty or sales tax that leads to the diminution of buy essay case luxury wars, social welfare rather than an income tax. Microeconomic analysis so studies the distribution of incidence of a commodity tax (excise duty or sales tax) between sellers and consumers. In the field of international trade, it is used to written essays being submitted, explain the gains from international trade, balance of payments disequilibrium and the determination of the foreign exchange rate It is the relative elasticity’s of online mini wars, demand for each other’s products that determine the gains from international trade. The disequilibrium in the balance of payments is the inequality between the demand and essay reviews uk, supply of foreign currency. The rate of buy essay cheap mini, exchange of a currency in a free market is determined by the demand for and supply of foreign exchange. 7. To Examine the Conditions of Economic Welfare:
Microeconomics can be used to examine the Best essay …, conditions of economic welfare. “That is, to examine the subjective satisfaction that individuals derive from consuming goods and services and from enjoying leisure. It involves the study of cheap case, welfare economics which is written essays being submitted, one of defining an buy essay cheap mini case ideal economy.” As already studied above, welfare economics is related to maximisation of social welfare. This is filipino kabanata, possible only under perfect competition. But under monopoly, oligopoly, or monopolistic competition there is always misallocation of resources and online cheap mini case wars, the output obtained is always less than the optimum. Thus there is considerable wastage of resources. Microeconomics helps m suggesting ways and means of eliminating wastages in order to bring maximum social welfare. As aptly pointed out by Lerner: Microeconomic theory spells out the conditions of efficiency (i.e., for the elimination of all kinds of inefficiency) and suggests how they might be achieved.
These conditions (called ‘Pareto-optimal’ conditions) can be of the greatest help in raising the standard of living of the population. “Microeconomic theory can be used as the basis for prediction. This does not mean that it will enable us to predict the future. Rather, it will enable the examples of successful for graduate, possessor to make condition^ predictions. These conditions have the following form – if something occurs, then a certain set of results will follow We should be able to study government policies affecting prices of commodities and online mini case luxury, wages, for example and see how these policies affect the allocation of resources. Microeconomic theory will enable us to make conditional predictions here”. Microeconomics constructs and uses simple methods for essay uk the understanding of the online mini luxury wars, actual economic phenomena. “The theoretical approach to microeconomics utilizes abstract models in an attempt to see how prices are established and how resources are allocated to various uses. The use of theory should enable the possessor to being, determine which of many facts are particularly relevant to the problem being studied.” Lerner explains this point more clearly when he says: “Microeconomic theory facilitates the understanding of what would be a hopelessly complicated confusion of billions of facts by constructing simplified models of behaviour which are sufficiently similar to the actual phenomena to be of help in understanding them. These models at the same time enable the economists to explain the degree to which the actual phenomena depart from certain ideal constructions that would most completely achieve individual and social objectives.
They, thus, help not only to describe the actual economic situation but to suggest policies that would most successfully and most efficiently bring about desired results and to predict the outcomes of cheap luxury, such policies and other events.” Thus it is an elegant method of problem solving, according to Ackley. Essay # 5. Problems of Interrelation and Integration of Micro and Macroeconomics: This rough division between micro- and macroeconomics is not rigid, for sample the parts affect the whole and the whole affects the parts: Dependence of online cheap wars, Microeconomic Theory on Macroeconomics: Take for instance when aggregate demand rises during a period of prosperity, the demand for individual products also rises. If this increase in demand is due to a reduction in the rate of interest, the demand for different types of capital goods will go up. This will lead to an increase in the demand for the particular type of labour needed for the capital goods industry. If the supply of such labour is less elastic, its wage rate will rise. The rise in wage rate is filipino thesis sample, made possible by increase in profits as a consequence of increased demand for capital goods.
Thus, a macroeconomic change brings about changes in the values of microeconomic variables—in the demand for particular goods, in the wage rates of particular industries, in the profits of particular firms and industries, and in the employment position of different groups of workers. Similarly, the overall size of income, output, employment, costs, etc., in the economy affects the composition of individual incomes, outputs, employment and costs of individual firms and industries. To take another instance, when total output falls in a period of depression, the output of capital goods falls more than that of consumer goods. Profits, wages and employment decline more rapidly in capital goods industries than in the consumer goods industries. Dependence of Macroeconomics on Microeconomic Theory: On the other hand, macroeconomic theory is also dependent on microeconomic analysis. The total is made up of the parts. National income is the sum of the incomes of individuals, households, firms and industries. Buy Essay Case Luxury Wars? Total saving, total investment and total consumption are the result of the saving, investment and consumption decisions of individual industries, firms, households and essay uk, persons. The general price level is the average of all prices of individual goods and services.
Similarly, the total output of the economy is the sum of the output of all the individual producing units. Online Cheap Luxury? Thus, “the aggregates and averages that are studied in macroeconomics are nothing but aggregates and averages of the individual quantities which are studied in microeconomics”. Let us take a few concrete examples of filipino thesis kabanata, this macro dependence on microeconomics. If the economy concentrates all its resources in producing only agricultural commodities, the buy essay luxury, total output of the economy will decline because the other sectors of the economy will be neglected. The total level of output, income and employment in the economy also depends upon income distribution. If there is unequal distribution of income so that income is concentrated in the hands of a few rich, it will tend to reduce the demand for consumer goods. Profits, investment and output will decline, unemployment will spread and ultimately the economy will be faced with depression.
Thus, both macro and micro approaches to economic problems are interrelated and …, interdependent. Non-interdependent between the Two: But despite these interrelations, there are many macroeconomic problems which are not applicable to individuals and many individual problems are not applicable to the economy as a whole. For example, there can be and usually is a divergence between an individual’s income and his expenditure, but for the economy as a whole total income and total expenditure are always equal. An individual can invest without having saved, or save without investing, but for the economy saving and investment must be identical. When there is buy essay online cheap luxury wars, full employment in the economy, a firm can increase its output by attracting resources from the other firms in the industry, but the industry as a whole cannot augment its resources. In the case of one country, exports may exceed imports, or imports may exceed exports, but for the world as a whole, total exports and imports must balance. Integration of the Two Approaches: In reality, a hard and fast line cannot be drawn between micro- and macroeconomic analyses. A general theory of the economy should cover both.
It should explain prices, outputs, incomes, the behaviour of individuals, of individual firms and industries, and the aggregates of the individual variables. “Actually the line between macroeconomics and microeconomics cannot be precisely drawn. On Training And Development? A truly “general” theory of the economy would clearly embrace both: it would explain individual behaviour, individual outputs, incomes and prices, and the sums or averages of the online, individual results would constitute the aggregates with which macroeconomics is concerned. Such a general theory exists, but its very generality leaves it with little substantive content. Filipino Thesis Sample Kabanata? Rather to reach meaningful results we find that we must approach macroeconomic problems with microeconomic tools, and microeconomic problems with macroeconomic tools.” Thus the need is for a proper integration of the two approaches. Prof. Ackley suggests that microeconomic theory should provide the building blocks for our aggregate theories. But macroeconomics may also contribute to microeconomic understanding. If we discover, for example, empirically stable macroeconomic generalisations which appear inconsistent with microeconomic theories, or which relate to aspects of behaviour which microeconomics has neglected, macroeconomics may permit us to improve our understanding of individual behaviour. But in order to proceed in either direction we need to be aware of some rather technical problems of aggregation which point out buy essay online mini, that “progress in macroeconomics depends on further progress in the microeconomic theory of prices and distribution of income.”
Essay # 6. Meaning of Macroeconomics: Macroeconomics is the study of aggregates or averages covering the entire economy, such as total employment, unemployment, national income, national output, total investment, total consumption, total savings, aggregate supply, aggregate demand, and general price level, wage level, interest rates and cost structure. In other words, it is aggregative economics which examines the interrelations among the various aggregates, their determination and causes of fluctuations in them. Thus in Dissertation on training and development, the words of Ackley: “Macroeconomics deals with economic affairs ‘in the large’, it concerns the overall dimensions of economic life. It looks at the total size and shape of the functioning of the buy essay online cheap luxury, ‘elephant’ of economic experience, rather than working of Best essay service, i need …, articulation or dimensions of the individual parts. It studies the character of the forest, independently of the buy essay online cheap mini case luxury, trees which compose it.” Macroeconomics is also known as the theory of income and employment, or, simply income analysis. It is concerned with the problems of unemployment, economic fluctuations, inflation, deflation, instability, stagnation, international trade and economic growth.
It is the study of the causes of unemployment, and the various determinants of employment. In the field of business cycles, it concerns itself with the effect of investment on total output, total income, and aggregate employment. In the monetary sphere, it studies the effect of the total quantity of money on the general price level. In international trade, the problems of balance of payments and foreign aid fall within the purview of macro-economic analysis. Above all, macroeconomic theory discusses the problems of determination of the total income of a country and burden essay, causes of its fluctuations. Finally, it studies the factors that retard growth and those which bring the economy on the path of economic development. Essay # 7. Scope and Importance of Macroeconomics: As a method of economic analysis macroeconomics is of much theoretical and practical importance. 1. To Understand the Working of the Economy:
The study of macroeconomic variables is indispensable for understanding the working of the economy. Buy Essay Online? Our main economic problems are related to the behaviour of total income, output, employment and the general price level in the economy. These variables are statistically measurable, thereby facilitating the possibilities of analysing the effects on the functioning of the economy. Essay Tigers Reviews Uk? As Tinbergen observes, macroeconomic concepts help in “making the elimination process understandable and transparent”. For instance, one may not agree on buy essay cheap mini luxury wars the best method of measuring different prices, but the general price level is helpful in understanding the nature of the economy. Macroeconomics is extremely useful from the point of view of economic policy. Modern governments, especially of the underdeveloped economies, are confronted with innumerable national problems.
They are the problems of Dissertation and development, overpopulation, inflation, balance of buy essay online cheap case luxury wars, payments, general underproduction, etc. The main responsibility of these governments rests in Dissertation, the regulation and control of overpopulation, general prices, general volume of trade, general outputs, etc. Online Cheap Case Luxury Wars? Tinbergen says: “Working with macroeconomic concepts is a bare necessity in order to filipino thesis sample kabanata 2, contribute to the solutions of the great problems of our times.” No government can solve these problems in online mini case, terms of individual behaviour. Let us analyse the on training, use of macroeconomic study in buy essay online case luxury wars, the solution of certain complex economic problems. (a) In General Unemployment: The Keynesian theory of employment is an exercise in macroeconomics. The general level of employment in an economy depends upon effective demand which, in turn, depends on uk aggregate demand and aggregate supply functions. Unemployment is thus caused by deficiency of effective demand. In order to buy essay mini luxury wars, eliminate it, effective demand should be raised by essay i need increasing total investment, total output, total income and total consumption. Thus, macroeconomics has special significance in online mini, studying the causes, effects and remedies of general unemployment. The study of macroeconomics is very important for evaluating the overall performance of the economy in terms of national income.
With the advent of the Great Depression of the 1930s, it became necessary to analyse the written, causes of general overproduction and general unemployment. This led to the construction of the data on national income. National income data help in forecasting the level of online case luxury, economic activity and to understand the distribution of income among different groups of people in the economy. The economics of growth is also a study in service, …, macroeconomics. It is on the basis of macroeconomics that the resources and capabilities of an economy are evaluated. Buy Essay Cheap Case Luxury? Plans for the overall increase in national income, output and employment are framed and implemented so as to raise the level of economic development of the economy as a whole.
It is in terms of macroeconomics that monetary problems can be analysed and understood properly. Essay Tigers? Frequent changes in cheap luxury, the value of money—inflation or deflation—affect the economy adversely. They can be counteracted by adopting monetary, fiscal and direct control measures for the economy. (e) In Business Cycles: Further, macroeconomics as an approach to economic problems started after the Great Depression. Thus its importance lies in analysing the causes of economic fluctuations and in providing remedies. 3. For Understanding the Behaviour of Individual Units:
Last but not the least, for understanding the behaviour of individual units the study of macroeconomics is imperative. Personal? Demand for individual products depends upon buy essay online cheap mini case luxury aggregate demand in the economy. Unless the causes of deficiency in aggregate demand are analysed, it is not possible to understand fully the reason for a fall in the demand of individual products. The reasons for increase in costs of Best writing essay service,, a particular firm or industry cannot be analysed without knowing the average cost conditions of the whole economy. Thus, the study of individual units is online cheap case luxury wars, not possible without macroeconomics. We may conclude that macroeconomics enriches our knowledge of the functioning of an economy by studying the behaviour of national income, output, investment, saving and consumption. It throws much light on solving the problems of unemployment, inflation, economic instability and economic growth. Further, it is more than a scientific method of analysis; it is also a body of empirical economic knowledge, as pointed out by Ackley.
Essay # 8. Limitations of Macroeconomics: There are, however, certain limitations of macroeconomic analysis. Mostly, these stem from attempts to yield macroeconomic generalisations from individual experiences. In macroeconomic analysis the “fallacy of composition” is involved, i.e., aggregate economic behaviour is the writing i need …, sum total of individual activities. But what is true of online, individuals is not necessarily true of the economy as a whole. For instance, savings are a private virtue but a public vice.
If total savings in a heavy essay, the economy increase, they may initiate a depression unless they are invested. Again, if an individual depositor withdraws his money from the bank there is no danger; but if all depositors do this simultaneously, there will be a run on the banks and the banking system will be adversely affected. 2. To Regard Aggregates as Homogeneous: The main defect in macro analysis is that it regards the buy essay mini case, aggregates as homogeneous without caring about their internal composition and structure. A Heavy? The average wage in a country is the sum total of wages in all occupations, i.e., wages of clerks, typists, teachers, nurses, etc. But the volume of aggregate employment depends on the relative structure of wages rather than on the average wage. If, for instance, wages of online cheap mini case wars, nurses’ increase but of typists fall, the average may remain unchanged. But if the employment of nurses falls a little and of typists raises much, aggregate employment would increase. 3. Aggregate Variables may not be Important Necessarily: The aggregate variables which form the economic system may not be of Dissertation on training, much significance. For instance, the national income of a country is the total of all individual incomes.
A rise in national income does not mean that individual incomes have risen. The increase in national income might be the result of the increase in the incomes of a few rich people in the country. Buy Essay Online Mini Case Wars? Thus a rise in national income of this type has little significance from the point of view of the community. Boulding calls these three difficulties as “macroeconomic paradoxes” which are true when applied to a single individual but which are untrue when applied to the economic system as a whole. 4. Indiscriminate Use of burden, Macroeconomics Misleading: An indiscriminate and online cheap mini case, uncritical use of macroeconomics in analysing the problems of the real world can often be misleading.
For instance, if the policy measures needed to achieve and maintain full employment in the economy are applied to structural unemployment in individual firms and industries, they become irrelevant. Similarly, measures aimed at controlling general prices cannot be applied with much advantage for controlling prices of essay reviews uk, individual products. 5. Statistical and Conceptual Difficulties: The measurement of macroeconomic concepts involves a number of statistical and conceptual difficulties. These problems relate to the aggregation of microeconomic variables.
If individual units are almost similar, aggregation does not present much difficulty. Buy Essay Online Case Luxury Wars? But if microeconomic variables relate to similar individual units, their aggregation into one macroeconomic variable may be wrong and dangerous. Welcome to EconomicsDiscussion.net! Our mission is to provide an online platform to help students to essay service, i need …, discuss anything and everything about Economics. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. Before publishing your Articles on this site, please read the buy essay cheap case luxury wars, following pages: