Chapter 5- Microeconomics and Macroeconomics

Question 1

Microeconomics

Answer 1

Microeconomics: the study of the behavior and decisions of households and firms and the performance of individual markets

Question 2

Macroeconomics

Answer 2

Macroeconomics: The study of the whole economy

Question 3

Market

Answer 3

Market: an arrangement which brings buyers into contact with sellers

Question 4

Economic Agents (Decision Makers)

Answer 4

Economic Agents (Decision Makers): those who undertake economic activities and make economic decisions

Question 5

Private Sector

Answer 5

Private Sector: firms owned by shareholders and individuals

Question 6

Connection between microecnomics and macroeconomics

Answer 6

Microeconomic decisions effect the marcroeconomy and vice versa. Eg: Increase in government corporate tax could lead to a lower supply of cars due to increased costs of production.

Question 7

Decision Makers in Microeconomics and Macroeconomics

Answer 7

They are called economic agents and include households, firms and the government. Households are buyers and are also known as consumers, workers and savers. They seek low prices and better quality products. As workers they want better wages and working conditions, and as savers they want their money to be safe and have good return on investment.

Firms are business concerns who produce goods and services and employ factors of production. Their main aim as private sector firms is to make as much profit as possible

Government produces some goods and services, it provides financial benefits and taxes and also regulates the private sector. The main aim of government is to make a strong economy by having objectives for the macroeconomy (full employment of labor). It may also try and improve the performance of individual markets by taxing demerit goods.