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SCOPE OF ECONOMICS

Economics has deep roots and close ties in most society problems and global affairs; it also has come a long way with social philosophy, thus bringing about the breadth and depth of this discipline. Let’s first take a brief look at the two major divisions of economics: microeconomics and macroeconomics.

Microeconomics

The term micro has been derived from the Greek word micros, which means small. In microeconomics attention is concentrated on a very small part of individual units. The microeconomics is the study of “the particular firms, household, individual prices, wages, incomes ext. Microeconomics studies behaviors of individual decision makers such as you in a particular market such as that for refrigerator, and their interrelationships. Microeconomics examines the factors that influence individual economic choices and how the choices of various decision makers are coordinated by markets. To illustrate, microeconomics explains how price and quantity supplied for a certain product interact, determine each other and finally come to equilibrium. Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the supply and demand of goods and services.

Macroeconomics

This also derived from Greek word macros, meaning large. Macroeconomics is a branch of Economics that deals with the performance, structure, and behavior of the economy as a whole. Macroeconomists seek to understand the determinants of aggregate trends in the economy with particular focus on national income, unemployment, inflation, investment, and international trade. In contrast, microeconomics is primarily focused on the determination of prices and the role of prices in allocating scarce resources. It implies the study of economics aggregates or the wholes.

The problems like full employment, unemployment, economic stability and economic growth cannot be accurately investigated through the examination of infinitesimally Small units like individual consumer, producer, workers or firms. The action of a single employer cannot have a perceptible impact upon the employment situation of a country. The production or investment by a single firm is unlike to generate cyclical fluctuations. The proper analysis of such problem requires an aggregated thinking. Full employment, economic growth and instability are concerned with entire economic system.

Unlike microeconomics that studies particular markets, macroeconomics dedicates itself into the overall behavior and performance of an entire economy. What happens in an economy is the outcome of thousands of millions of individual decisions, and macroeconomics puts all the small pieces that are subjects of microeconomics together to focus on the big picture, as at a national or a global level.