The opinions of different economists on how micro and macro economy works

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The opinions of different economists on how micro and macro economy works

The opinions of different economists on how micro and macro economy works

Individual actors are often broken down into microeconomic subgroups, such as buyers, sellers and business owners. These actors interact with the supply and demand for resources, using money and interest rates as a pricing mechanism for coordination.

The Uses of Microeconomics As a purely normative science, microeconomics does not try to explain what should happen in a market. Instead, microeconomics only explains what to expect if certain conditions change.

If a manufacturer raises the prices of cars, microeconomics says consumers will tend to buy fewer than before. If a major copper mine collapses in South America, the price of copper will tend to increase, because supply is restricted.

Microeconomics could help an investor see why Apple Inc. Microeconomics could also explain why a higher minimum wage might force The Wendy's Company to hire fewer workers. However, questions about aggregate economic numbers remain the purview of macroeconomicssuch as what might happen to the gross domestic product GDP of China in These methods attempt to represent human behavior in functional mathematical language, which allows economists to identify a mathematically testable model of individual markets.

The Marshellian and Walrasian methods fall under the larger umbrella of neoclassical microeconomics. As logical positivists, neoclassicals believe in constructing measurable hypotheses about economic events, then using empirical evidence to see which hypotheses work best. Unlike physicists or biologists, economists cannot run repeatable tests, so neoclassical economists make simplifying assumptions about markets — such as perfect knowledge, infinite numbers of buyers and sellers, homogeneous goods, or static variable relationships — to identify solutions.

Economic efficiency is determined by how well real markets adhere to the rules of the model.

The opinions of different economists on how micro and macro economy works

The major competing view, most frequently espoused by the Austrian school, dismisses neoclassical static equilibrium as unrealistic and fatally flawed. Instead, Austrian economics opts for an analysis based on logical deduction, using the twin principles of spontaneous order and subjectivism.

Rather than assuming away heterogeneity and imperfection, the Austrian model describes how economic incentives help individuals overcome the real problems of ignorance and uncertainty.

In other words, markets arise because people have incomplete knowledge, different preferences and other imperfections. Basic Concepts of Microeconomics The study of microeconomics involves several key concepts, including but not limited to: Demand, supply and equilibrium: The theory of supply and demand help determine prices in a competitive market.

That results in economic equilibrium. This theory states that the price of goods or services is determined by the cost of the resources going into making it. It looks at the suppliers of labor services or workersthe demand for this service employersand tries to understand the pattern of wages, employment and income.In macro economics, the economy may be in a state of disequilibrium (boom or recession) for a longer period.

There is little debate about the basic principles of micro-economics. Macro economics is more contentious. There are different schools of macro economics offering different explanations (e.g.

Keynesian, Monetarist, Austrian, Real Business cycle e.t.c). Macroeconomics vs. Microeconomics Diffen › Education Macroeconomics is the branch of economics that looks at economy in a broad sense and deals with factors affecting the national, regional, or global economy as a whole.

Sep 07,  · This video explains the difference between micro and macro economics as explained by the neo-classical school of economics.

micro economics is the study of individual parts of the focuses on economic behaviour of consumers and firms and macro economics is the study of the economy as a wh focuses.

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology; highlights scarcity, efficiency, trade-offs, opportunity cost, and economic growth.

2 CHAPTER 1 What Is Macroeconomics? Why were U.S. equity markets so strong at the start of the 21st century? Why does the Fed worry about inflation? Would the Fed raise interest rates to combat inflation? Why do financial markets tend to react negatively to higher interest rates?

How do highter interest rates lower inflation? FIGURE Macroeconomic Questions.

Distinguish between micro economics and macro economics