econ chapter 2.1 (micro & macroeconomics) Flashcards
What is microeconomics
The study of decision-making by INDIVIDUAL consumers, producers and households
What are some questions to be considered under microeconomics (individual consumers)
-What combination of goods and services will consumers demand?
-What factors will influence an individuals choice of goods and services?
-How do people decide to work? What type of work do they decide to do: full-time, part-time or seasonal?
-How do individuals decide how much to spend and how much to save for the future?
What are some questions to be considered under microeconomics (firms)
How do individual firms decide to organise and allocate their scarce resources?
How much will individual firms produce and sell?
What determines a firm’s decision on the price of its products?
How will firms decide whom and how many people to employ?
How will the firm finance its business?
When will a firm decide to expand, downsize or even shut down?
What are some questions to be considered under microeconomics (governments)
How can the actions of the government influence the behaviour of individual firms and businesses?
What goods and services are to be provided to benefit society?
Why do governments want to reduce the consumption of unhealthy goods?
Why are subsidies important to help domestic firms reduce their costs and increase their production?
Whats an example of microeconomics in action
if the price of fuel increases, demand for fuel will decrease. The demand for cars will also decrease as they are a complementary good to fuel. Both the automobile industry and the oil industry will be impacted due to changes in fuel prices.
Microeconomics is a study of:
The different demand and supply structures of different goods and services in the economy.
The response by consumers to a change in price of goods and services (price elasticity of demand.
The difference between free market and mixed economies.
Why people demand harmful goods (such as cigarettes).
Why producers sell harmful goods.
The importance of government intervention (intervention is the act of getting involved in a difficult situation in order to improve it or to prevent it getting any worse) in restricting the demand and supply of harmful goods.
The different market structures and the business costs incurred due to production of goods and services.
What is macroeconomics
the study of the economic behaviour of the entire economy. It studies the total demand and the total supply of all goods and services.
It analyses the general price levels (inflation or deflation) in the entire economy.
whats an example of macroeconomics
Zimbabwe’s price levels have increased in recent years and are still rising.
The impact of high inflation in Zimbabwe will lead to high prices for consumers and high raw material prices for producers.
This will impact employment levels in many industries, and eventually have a negative impact on Zimbabwe’s economic growth.
