Micro Economics

It is the same as it is in calculus: Its the point on a curve where the rate of the rate of change of the curve flips.

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an increase in standard of living comes from increase in income. An increase in national income will increase the standard of living of the people of that nation.
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A difference is that with ordinal utility approaches, you cannot numerically measure the level of consumer satisfaction. With cardinal utility approaches, you can to an extent.

The term micro is derived from Greek word 'mikros' meaning 'small' and the term macro is derived from the Greek word 'makros' meaning 'large'.

Thus, Micro economics studies the economic behaviour of individual decision making units such as consumers, resource owners and business firms. It makes a microscopic study o the economy.

Whereas, Macro economics is concerned with the analysis of the behaviour of the whole economy. It deals with those aggregates which relate to the whole economy like total consumption, total investment, total savings, etc.

Microeconomics is the study of small part of the whole economy. It deals with particular firms, household, individual, prices wages, incomes, individuals, industries, particular commodities.

On the other hand the word Macro means large in scope, and explains the bigger picture, or universal.

Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on other forces that determine price levels for specific companies in specific industry sectors. For example, microeconomics would look at how a specific company could maximize it's production and capacity so it could lower prices and better compete in its industry.

Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by unemployment rate.

While these two studies of economics appear to be different, they are actually interdependent and complement one another since there are many overlapping issues between the two fields. For example, increased inflation (macro effect) would cause the price of raw materials to increase for companies and in turn affect the end product's price charged to the public.

The bottom line is that microeconomics takes a bottoms-up approach to analyzing the economy while macroeconomics takes a top-down approach. Regardless, both micro- and macroeconomics provide fundamental tools for any finance professional and should be studied together in order to fully understand how companies operate and earn revenues and thus, how an entire economy is managed and sustained.

Macro economics is the study of an entire national economy, or an international economy. It is what is usually meant by the term economics. Micro economics is the application of economic theory to a smaller economic system such as a single family or business.

Macro- and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. The field of study is vast; here is a brief summary of what each covers:

Study one economic concept in depth

microeconomics seeks to explain the working of individual prices, wages, particular industries.

merits of microeconomics:

1. formulating economics policies and scare resource of the country

2. achieve maximum output with minimum input.

1. Linear Isoquant: This type assumes perfect substitutability of factors of production: a given commodity may be produced by using only capital, or only labour, or by an infinite combination of K and L.
2. Input-Output Isoquant: This assumes strict complementarity[that is, zero substitutability] of the factors of production. The isoquant take the shape of a right angle. This type of isoquant is also called 'Leontief isoquant' after Leontief, who invented the input-output ananlysis.
3. Kinked Isoquant: This assmes limited substitutability of K and L. There are only a few processes for producing any one commodity. Substitutability of factors is possibleonly at the kinks. This form is also called 'activity analysis-isoquant' or 'linear-programming isoquant', because it is basically used in linear programming.
4. Smooth , Convex Isoquant: This form assumes continuous substitutability of K and L only over a certain range, beyond which factors cannot substitute each other. The isoquant appears as a smooth curve convex to the origin.

Micro looks only at the market for a particular good. For example, the supply, demand, price, etc for iron ore.

Macro is concerned with "the economy" as a whole. Its going to look at aggregate supply/demand for a country, the globe, whatever the scale may be. Things like GDP, interest rates, money supply etc are macro issues.

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Macroeconomics deals with the economy as a whole and it examines the forest not the trees. whereas microeconomics focuses on specific units which comprises the economy and it deals withs trees not the forest

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Who is the father of microeconomics?

Chapter 3 Problem 5

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An example of empirical evidence would be, reading a thermometer. No matter who observes it the thermometer still displays the same temperture.

In general, anytime a free market is prohibited from setting prices in equilibrium, supply and demand will not match, and surpluses or shortages will occur.

In the case of a binding price ceiling, an upper limit is set on the price, below what the economy would naturally want. Thus, demand is higher than what is should be, and supply is lower - there is excess demand, or a shortage. This occurs in rent-controlled apartments in New York City, and also partially led to the disastrous winter at Valley Forge in the Revolutionary War. (Farmers were not willing to sell to the Continental Army at artificially low prices, and preferred to sell to the English instead.)

In the case of a binding price floor, the lower limit on price is above that clearing price, and supply exceeds demand, so there is a surplus. This is the case for many goods in the US farm industry, where the US government pays farmers not to plant to keep prices elevated, and used to buy large amounts of cheese and other agricultural products, for distribution to the needy or destruction.

The subject matter of microeconomics includes several factors. Some of these factors are commodity pricing, factor pricing, and welfare theory.

PPC is nothing but providing the better understandment of trade offs by an individual or society, it also referred as production possibilities frontier.

If a disease kills half of the economy's cow population, less milk production is possible, so the PPF shifts inward (PPF2). Note that if the economy produces all cookies, so it doesn't need any cows, then the production is unaffected. But if the economy produces any milk at all, then there will be less production possible after

A price floor is the minimum price set by the government where as a price ceiling is the maximum price sellers can charge for a good or service.

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The nature and scope of microeconomics is specified to a particular economy. This means that it does not focus on too much risk as compared to macroeconomics which looks at the entire economy.

A simplified representation of the economic functioning of any of the smaller units within a country's economy such as households, city government or a firm