Introduction To Micro & Macro Economics Flashcards
Lecture 1
What Is Economics?
Economics studies how people use limited resources to meet unlimited needs, focusing on production, distribution and consumption.
What is the aim of Economic Theory?
- Production - The amount of goods and services that need to be made.
- Distribution - How products or services are delivered to people.
- Consumption - Who will use the products and services and who are they meant for.
What Is Micro-Economics?
Micro-Economics deals with the decision making processes of the individual and the firm.
Example: Individual Consumer / Buyer
Individual Supplier / Producer
Example: Sole Trader Business, Partnership Business
What Is Macro-Economics?
Macro-Economics is the study of how a country’s economy works as a whole.
It Focuses On Big Things Such As: Economic Growth, Inflation, Unemployment Rate
What is the definition of Economic Growth?
How much goods and services a country produces in a year.
What is the definition of Inflation?
The prices for things rising over time which will affect the things we want to buy and how much we want to buy.
What are the variable that affect Macro-Economics?
- Employment
- Total National Income (TNI)
- Standard Of Living (Quality Of Education, Quality Of Healthcare, Quality And Affordability Of Living Conditions)
- Crime Rates
What is the difference between Micro-Economics and Macro-Economics?
Micro-Economics focuses on individual businesses and a smaller sector of the economy.
Macro-Economics focuses on the Economy as a whole and bigger markets.
How does unemployment affect Macro-Economics?
The causes and consequences of unemployment and the reasons for the changing structure of the work force.
What are the causes of unemployment?
Economic Downturns: When the economy is struggling, businesses often stop hiring employees and lay off workers.
Skills Mismatches: Sometimes people don’t have the skills needed for available jobs especially after new technologies and artificial intelligence.
What are the consequences of Unemployment?
Economic Slowdown: High unemployment will lead to less spending due to the public having limited resources such as money which can have an impact on businesses and slow down economic growth.
Government Burden: More people without jobs means that the government will face higher costs such as paying for government support programmes such as housing benefits.
How will the government be affected by Unemployment?
Unemployment means their will be no income tax from unemployed people which will affect the Economy.
How does inflation affect Macro-Economics?
The economics of price inflation - who loses and who benefits.
Who loses from inflation?
Consumers: When prices rise, consumers can afford less with with the same amount of money, which reduces their purchasing power.
Borrowers with variable interest rates as their interest rates on loans will increase depending on the inflation.
Who gains from Inflation?
Owners of Assets such as property and land as their assets price will increase which means they can sell their assets for profit.
Certain Businesses: Companies are able to charge higher prices for their services or goods which means their profit margins will increase.
How does Price Changes Affect National And International Economic For Substitute?
Substitutes
Price Increases - If the price of a good rises, consumers may shift to a cheaper substitute.
Price Decrease: If the prices of a good decreases. The demand will decrease for substitute products.
How does Price Changes Affect National And International Economic For Complementary Goods?
Complimentary Goods
Price Increase - The demand for complimentary products will decrease and demand for substitute products will increase.
Price Decrease - The demand for complimentary goods will increase and demand for substitute products will decrease.
How Will New Products Cause National And International Economic Issues?
Innovative Products can disrupt existing markets, potentially leading to the decline of essential. This can lead to job losses and economic problems in industries that can’t adapt.
How Will New Products Affect Industries?
Industries that struggle to adapt will lose customers and going out of business if their not able to compete with the new products and make their products better.
National And International Economy Issues:
- Access to a wider range of market.
- Lower Trade Barriers
- Production Efficiency
- Interest Rate Changes And Inflation
How Does Accessing Wider Range Of Markets Affect International Economy?
Trading between countries will expand market opportunities which lead to the business having higher potential to increase sale which will lead better economy.
How Does Accessing Wider Range Of Markets Affect National Economy?
Economic Growth
Gross Domestic Product Boost: Higher exports contribute to overall economic growth which will have a positive impact on GDP.
Job Creation: Increased demand for products and services will lead to more hiring, reducing unemployment and raising incomes.
What Is The Drawback Of Accessing Wider Markets For The National Economy?
Local Business At Risk: Local businesses will struggle to compete with large foreign companies which will potentially lead to job losses and and business closures.
Resource Exploitation: When businesses produce more goods to sell in international markets, they might use up their natural resources too quickly which may cause environmental damage such as pollution and loss of wildlife and cause damage to nature.
What Is Gross Domestic Product (GDP)?
A way to measure how much money a country makes from all the goods and services produces within a period which is usually a year.
What Is The Drawback Of Accessing Wider Markets For The International Economy?
Businesses may move production to countries with weaker labour laws which will lead to exploitation of workers and poor working conditions.
