Moving from Microeconomic to Macroeconomic
Microeconomic analysis:
Microeconomic is based on the supply and demand principles. As the change in price of a good or services, it will change in quantity supplied (movement along a supply curve) (text book ). When change in income, preferences or prices of other goods or services, it will change supply (shift of a curve). (text book )
The following example illustrates the simple idea on the affect of behavior for the individual firms/household in the market. Assuming as the demands of iPhone increase. Figure 1 Supply and Demand diagram for iPhone.
The result shows as the demands increase, the quantity and price increase. That means when more people want to buy more iPhone, Apple will increase the quantity as the price increase. Apple will be profitable in this case. To be mentioned, equilibrium occurs when quantity supplied and quantity demand are equal. At equilibrium, there is not tendency for price to change which market equilibrium can be resulting excess in demand or excess in supply. (text book) Macroeconomic analysis : Macroeconomic is where aggregate demand and supply occurs on the total demand and supply of goods and services in an economy. ( Chapter 20) The following example can be a good example of illustrates the aggregate demand and supply. Assuming the technology change the productivity of the economy. Figure 2 Example for Aggregate supply and aggregate demand This macroeconomic graph emphasis that technology change the aggregate supply on the market, the overall price increase and the rate GDP on aggregate output decreased. This means technology increase the supply of productivity which By comparing the demand and supply curve of Microeconomics and Macroeconomic. It can generalize a few differences between them: 1. Microeconomic means the small segment of the economy and macroeconomic means the overall aggregate economy. 2. Microeconomic can soon create equilibrium in the market however there maybe recession or depression happens in macroeconomics in longer period. 3. Macroeconomic investigate the overall price level instead of the individual market price. Also they consider the aggregate output instead of the quantity. 4. Macroeconomic concerns of the economy-wide phenomena, which include the inflation, output growth and unemployment. It will explain them briefly in the following paragraphs. Inflation Inflation is when the overall price level increase whereas deflation means a decrease in the overall prices. (textbook) Output Growth Output growth usually measures the performance in short run and long run. The business cycle is the cycle of short -term ups and downs in the economy. Also, the aggregate output represent the total quantity of goods and services produced in an economy in a given period. (Figure 2) which the aggregate output could be decline. If the aggregate output declines more than six months, it called recession whereas a period is a prolonged (longer than a year), it called depression. (textbook) Unemployment The employment rate means the percentage of the labor force that is unemployed according for the following equation. (textbook) Figure 3 Unemployment rate equations The Relationship between Microeconomic and Macroeconomics Influence on microeconomic and macroeconomics Even microeconomic and macroeconomics seems to have different studies on economics, however they are interdependent and replenish to each other. …show more content…
The most common example will be inflation.
Inflation is defined as a rise in the general price level over a period of time, which many goods and services such as foods and transportation will rise along with the inflation period. This will create problems for economy on the microeconomic level.
In firms, costs of production will rise, the interest rate, taxes, electricity and rent will become more expensive and workers demand higher wages to compensate for inflation. However, the major influence on inflation will be on the production field, the below graph is an example on inflation affect on the fishes’ supply and demand.
Figure 4 Inflation effect in gases
The graph illustrates that when the price increase, the supply decrease but demand increase and the quantity decrease. This means when inflation occurs, more people demand for fishes and when more people desire to buy fish, the supply and quantity decreases. Besides inflation, there are more examples that microeconomic and macroeconomics connected together with the economy. They might not be directly affected
Microeconomic analysis:
Microeconomic is based on the supply and demand principles. As the change in price of a good or services, it will change in quantity supplied (movement along a supply curve) (text book ). When change in income, preferences or prices of other goods or services, it will change supply (shift of a curve). (text book )
The following example illustrates the simple idea on the affect of behavior for the individual firms/household in the market. Assuming as the demands of iPhone increase. Figure 1 Supply and Demand diagram for iPhone.
The result shows as the demands increase, the quantity and price increase. That means when more people want to buy more iPhone, Apple will increase the quantity as the price increase. Apple will be profitable in this case. To be mentioned, equilibrium occurs when quantity supplied and quantity demand are equal. At equilibrium, there is not tendency for price to change which market equilibrium can be resulting excess in demand or excess in supply. (text book) Macroeconomic analysis : Macroeconomic is where aggregate demand and supply occurs on the total demand and supply of goods and services in an economy. ( Chapter 20) The following example can be a good example of illustrates the aggregate demand and supply. Assuming the technology change the productivity of the economy. Figure 2 Example for Aggregate supply and aggregate demand This macroeconomic graph emphasis that technology change the aggregate supply on the market, the overall price increase and the rate GDP on aggregate output decreased. This means technology increase the supply of productivity which By comparing the demand and supply curve of Microeconomics and Macroeconomic. It can generalize a few differences between them: 1. Microeconomic means the small segment of the economy and macroeconomic means the overall aggregate economy. 2. Microeconomic can soon create equilibrium in the market however there maybe recession or depression happens in macroeconomics in longer period. 3. Macroeconomic investigate the overall price level instead of the individual market price. Also they consider the aggregate output instead of the quantity. 4. Macroeconomic concerns of the economy-wide phenomena, which include the inflation, output growth and unemployment. It will explain them briefly in the following paragraphs. Inflation Inflation is when the overall price level increase whereas deflation means a decrease in the overall prices. (textbook) Output Growth Output growth usually measures the performance in short run and long run. The business cycle is the cycle of short -term ups and downs in the economy. Also, the aggregate output represent the total quantity of goods and services produced in an economy in a given period. (Figure 2) which the aggregate output could be decline. If the aggregate output declines more than six months, it called recession whereas a period is a prolonged (longer than a year), it called depression. (textbook) Unemployment The employment rate means the percentage of the labor force that is unemployed according for the following equation. (textbook) Figure 3 Unemployment rate equations The Relationship between Microeconomic and Macroeconomics Influence on microeconomic and macroeconomics Even microeconomic and macroeconomics seems to have different studies on economics, however they are interdependent and replenish to each other. …show more content…
The most common example will be inflation.
Inflation is defined as a rise in the general price level over a period of time, which many goods and services such as foods and transportation will rise along with the inflation period. This will create problems for economy on the microeconomic level.
In firms, costs of production will rise, the interest rate, taxes, electricity and rent will become more expensive and workers demand higher wages to compensate for inflation. However, the major influence on inflation will be on the production field, the below graph is an example on inflation affect on the fishes’ supply and demand.
Figure 4 Inflation effect in gases
The graph illustrates that when the price increase, the supply decrease but demand increase and the quantity decrease. This means when inflation occurs, more people demand for fishes and when more people desire to buy fish, the supply and quantity decreases. Besides inflation, there are more examples that microeconomic and macroeconomics connected together with the economy. They might not be directly affected