Microeconomics vs Macroeconomics

Microeconomics vs Macroeconomics Microeconomics focuses on decisions that individual consumers and businesses make and how they interact with each other Macroeconomics takes a broad view of the economy and how different macroeconomic players (households, government and businesses) interact with each other and the impact on the country as a whole Microeconomics with INDIVIDUAL ACTORS in the economy. It could be one consumer, one household, one firm, or even one industry... Some questions we aim to answer in microeconomics are if price of cars go up.. What happens to consumer demand.. If income levels of people increase.. How would it increase the demand? Microeconomics deals with the individual parts of the economy.. What happens if money supply increase? What causaess the economy to grow over time? In a nutshell studeis the economy as a whole... Microeconomic asnd Macroeconomic sare interrelated.. If interest rates go down.. How would GDP change? To answer this Q.. Understand micro.. How will a consumer respond to an interest rate drop? Will they be saving less? How will a firm respond to an interest rate drop? Will firms start investing more? Copyright © 2005 by McGraw-Hill Ryerson Limited. All rights reserved.

Examples of Microeconomics Individuals switching over to Apple products from Samsung products, causing Apple products prices to rise Firms deciding to cut production of VHS tapes because it’s no longer generating money Firms are increasing production of DVDs Watermelons have proven to cure many diseases. Consumer demand for watermelons goes up

Examples of Microeconomics Farmers in Ghana are producing more watermelons A new company Acer is offering cheaper electronic products. Consumers are switching over to Acer from Apple products. In reaction to Acer, Apple is increasing its marketing budget to gain back market share. Everyone is demanding more gas. Price of gas goes up

Examples of Macroeconomics The economy is doing well, consumer purchases have gone up 50% Because consumer purchases have gone up 50%, firms are producing more, causing overall GDP to go up. Because GDP has been going up, price levels of all products have been going up too. Inflation rate has risen by 0.2%. Banks have decreased interest rates. Individuals are borrowing more, increasing their overall purchases Government has increased tax rates. Individuals have less to spend, causing the overall consumption level to go down.

Examples of Macroeconomics Because overall purchases have gone down. Firms are laying off staff. Unemployment rate goes up 10%. Government established a new agreement with other countries, increasing Canada’s export. As a result, the Canadian GDP (a.k.a economic growth) increased by 5%