...MACROECONOMICS & THE GLOBAL ECONOMY Instructor SATYENDRA TIMILSINA What is Macroeconomics? • It is that branch of economics, which deals economic affairs at large i.e. total or aggregates • Concerns itself with variables such as – – – – Aggregate output of the economy Extent to which its resources are used Size of National Income General Price Level Introduction • Managers have to deal with economic environment at two levels – micro level and macro level • Micro level includes market structure and the strength of competitors. Firm’s decision making is mostly influenced by the activities of its rival forms. The following are some factors that affect firms decision at micro level – Level of competition – Cost of production and – Product differentiation Introduction • Macro level includes the overall system. This is something that the firm assumes to the given. • Decision making of the firm is affected by the macroeconomic environment. • The following macroeconomic factors have a strong effect on firm’s decision making – Overall Demand – Price Level – Rate of interest – Tax policies and – Exchange Rates Introduction • It is important for managers to know the macroeconomics because an unprecedented change in any of these factors can upset the revenue and cost of the firm, affecting the profitability and returns. • The problem can be minimized or managed if managers know the working of an economy and thereby, judge the...
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...ECO365 November 24, 2014 Microeconomics and the Law of Supply and Demand The Supply and Demand simulation concept is essential to understand the effects of pricing and availability to consumers on real world commodities. This simulation captures the impact of different scenarios and situation of the property management company, Goodlife Management in the city of Atlantis. In the scenarios and based on the situations that occurred, these factors influences the equilibrium such as adjusting the rental rate of the apartments to maximize revenue. An attempt to increase the price to ensure a sufficient number of apartments to be rented to satisfy the demands, and making modification to the firm's trend from rental apartments to homeownership in order to meet the needs of a growing population due to Lintech Inc (University of Phoenix, 2014). Macroeconomics VS. Microeconomics In the simulation, the concepts of both, study of Microeconomics and Macroeconomics, are examined. Macroeconomics focuses on factors that affect the economy as a whole (Colander, 2013). In the scenario where Lintech company was introduced, the changes led to the whole economy of the city of Atlantis, not just the financial situation of Goodlife Management firm. The firm perceived the increase of residential demands due to the company workers that relocated in the area. However, in the scenario, when the firm increased the rental price due to the foreseen increase of demand of more apartments need to be...
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...the impact of rational self-interest on each of the following decisions: a. Whether to attend college full time or enter the workforce full time Compare the benefits of attending college vs. working full time long tem and short term b. Whether to buy a new textbook or a used one Compare the risk of the textbook needing replacement, worn/hard vs. price 2. (Resources) To which category of resources does each of the following belong? a. A taxicab Capital, manufacture items b. Computer software Capital, manufacture items c. One hour of legal counsel labor, human effort d. A parking lot capital and natural resources; the parking lot is on a natural resource (land), but the land has undergone capital improvement in the form of leveling and paving 3- (Micro versus Macro) Determine whether each of the following is primarily a microeconomic or a macroeconomic issue: a. What price to charge for an automobile Microeconomic issue; it refers to the price of an individual good. b. Measuring the impact of tax policies on total consumer spending in the economy Macroeconomic issue; it refers to the economy as a whole. c. A household’s decisions about what to buy Macroeconomic issue; it refers to the economy as a whole. d. A worker’s decision regarding how much to work each week Microeconomic issue; it refers to the decisions of one worker. Chapter 2 4 (Opportunity Cost) You can either spend Spring Break working at home for $80 per day for five days or go to Florida for...
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...April 26, 2015 Project 1 Part 1 Microeconomics vs. Macroeconomics The field of economics is broken down into two different areas of focus, microeconomics and macroeconomics. Microeconomics takes a look at the smaller picture and focuses on the basic theories of supply and demand. It looks at how businesses decide how much of something to produce and how much to charge for it based on the supply and demand. Macroeconomics is the opposite; it looks at the bigger aspect of economics. This focuses on the national economy as a whole and provides basic knowledge of what works in the business world. Macroeconomics also deals with the GDP (gross domestic product), or explain unemployment rate. To understand how economy as a whole works it is important to understand both sides of economics. Government as an Economy: While businesses adjust their product based on supply and demand, the government has a powerful say over the economy. They most importantly are involved in stabilization and growth of the government. For stabilization they ensure that monopolies to not happen to ensure competition and prices lower. They maintain the production of mint that is printed so that there isn’t too much money to lower the value of it. They also adjust the spending and tax rates to have money for other things such as paying for schools, roadwork, etc. Government is also responsible for growth of business to create jobs by giving tax breaks to new business owners, taking part...
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...demand is high, the price will be high. In dissimilarity, the larger the supply and the lower the demand, lower the price will be. Microeconomics vs. Macroeconomics The supply and demand simulation displays different facets of economic structures. Even though typically concentrated on microeconomics, the simulation shows a unimportant aspect of macroeconomics. The principles of microeconomics will apply to a drop in rent prices to escalate the supply being demanded. An additional microeconomic principle displayed in the simulation is the rise in demand if the cost of rent is dropped. Macroeconomics principles come into play when the rise in demand for apartment was a direct product of the founding of a new company in town. The same principles of microeconomics relate to a surplus supply generated by a price ceiling applied by the government. While navigating through the simulation I was a focused on supply and demand and how it relates to the housing market in the city of Atlantis. It was a challenge as a property manager of Goodlife Management, superintending properties and forming the correct decisions to provide appropriate costs with the new scenarios. I myself had to revisit the site several times just to understand the concepts and clearly see my choices were not working out for the plan that the simulation was giving. Two microeconomics concepts that were present in the simulation was supply and demand. Demand is summarizes as the need or want of a product with the...
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...PART- I PAPER- I: MICROECONOMICS I Full Marks 50 1. INTRODUCTION: Nature and scope, scarcity and choice, concepts of demand and supply, impact of changes in demand and supply, price system as an economic mechanism. 2. CONSUMER BEHAVIOUR: Assumptions on preference ordering, indifference curve, budget constraint and consumer’s equilibrium, substitution effect (Hicks & Slutsky) and income effect, ordinary and compensated demand curves, inferior goods and Giffen goods, price consumption and income curves, derivation of labour supply and intertemporal choice, (saving and borrowing), Revealed Preference – the weak axiom and substitution effect. 3. DEMAND AND SUPPLY: Demand function, supply function, market equilibrium, stability of equilibrium, elasticities of demand and supply, consumer’s and producer’s surplus, burden of indirect taxes and subsidies, price and quantity controls, minimum wage, import tariff and quota. 4. PRODUCTION AND COST : Production function, total, average and marginal products, isoquants and economic regions of production, cost minimization and expansion path, elasticity of substitution, economies of scale, Cobb Douglas, fixed coefficient and CES functions, short run and long run costs. REFERRENCES: - Maddala-Miller Pindyck-Rubinfeld Varian (Intermediate) Ferguson-Gould Kutsoyanis (Modern Microeconomics) ...
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...goods and services | | | |are calculated during a | | | |certain time. | | |Real GDP |Real GDP is the whole |http://www.diffen.com/difference/Nominal_GDP_vs_Real_GDP | | |economical way to | | | |determine the value of |Nominal GDP vs. Real GDP | | |the economy after it has |...
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...Supply and Demand ECO365 July 23, 2013 Supply and Demand Microeconomics vs. Macroeconomics The supply and demand simulation shows different aspects of economic structures. Although mostly focused on microeconomics, the simulation does show a small role of macroeconomics. The principles of microeconomics would apply to drop in rent prices to increase the supply being demanded. Another microeconomic principle shown in the simulation is the rise in demand when the cost of rent is lowered. Macroeconomics principles came into play when the rise in demand for apartment was a direct product of the establishment of a new company in town. Same principles of microeconomics apply to an excess supply created by a price ceiling enforced by the government. Supply and Demand Shifts A shift in the demand curve was created when the new company brought an increase in population to Atlantis. A greater amount of people created a greater demand for the apartments. Equilibrium is reached in the demand shift by raising the price of rent to decrease demand. A supply shift was created when 400 apartments were converted into condominiums, which in turn caused a drop in supply. The equilibrium would be fixed by raising the cost to lower the demand because of a decrease in supply. Real World Application With the nutritional corporations expanding and health awareness on the rise prices of nutritional supplements are rising to meet the demand. Especially in local areas, there aren’t too many...
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...The study of economics allows us to understand how governments, employers, and households make decisions given the options and constraints that each of them has. This week we were assigned a scenario that involved decisions that were made by an employer and how those decisions impacted both the employer and individual households (University of Phoenix, n.d.). Macroeconomic Vs Microeconomic Principals Macroeconomics and microeconomics are both subcategories of economics. Macroeconomics involves a much broader approach to the economy and it involves decisions that the government makes in trying to regulate the economy. Microeconomics involves the study of how market demand and supply affect the decisions that households and firms make (Difference Between Net, n.d.) In the scenario that we reviewed, the government made macroeconomic decisions by implementing a price ceiling for rents, also known as a rent control policy. The choices that Goodlife had to make in response to that decision were also macroeconomic because Goodlife had to make a decision to not rent as many apartments, even though it had the capacity to rent more apartments. The government response to that decision would also be macroeconomic. Goodlife engaged in several microeconomic decisions by adjusting the supply of apartments when needed. In year one, Goodlife made a decision to lower rent prices in order to balance the excess supply with the market demand. Goodlife made another microeconomic decision in year...
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...Microeconomics and the Laws of Supply and Demand Name ECO 365/Microeconomics Date Professor Introduction The Supply and Demand simulation concept is essential to understand the effects of pricing and availability to consumers on real world commodities. This simulation captures the impact of different scenarios and situation of the property management firm, Goodlife Management in the city of Atlantis. Undergoing the scenarios, based on situations that occurred, these factors influences the equilibrium such as adjusting the rental rate of the apartments to maximize revenue, the attempt to increase the price to ensure sufficient number of apartments to be rented to satisfy the demands, and making modification to the firm’s trend from rental apartments to homeownership in order to meet the needs of the growing population due to Lintech Inc. Macroeconomics VS. Microeconomics In this simulation, the concepts of both study of Microeconomics and Macroeconomics are examined. Macroeconomics focuses on factors that affect the economy as a whole. In the scenario where Lintech company was introduced, the changes led to the whole economy of the city of Atlantis, not just the financial situation of Goodlife Management firm. The firm perceived the increase of residential demands due to the company workers that relocated in the area. However, in the scenario, when the firm increased the rental price due to the foreseen increased of demand of more apartments need to be rented...
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...Elasticity Paper: Substitute Products vs. Complement Products Annette Nunnally, Bobby Whitfield, Dwayne Brown, Reginald Lockhart ECO 365 Principles of Microeconomics February 24, 2015 Mr. Rick Pretzsch Elasticity Paper: Substitute Products vs. Complement Products Products or services are introduced into the market with the intention of fulfilling the desires or needs of a specific group. Most of the products need another product to function properly. The use of a printer requires an ink cartridge to be purchased in order to function. The higher the printer usage the more ink is consumed. Also, the free marketplace gives manufacturers the ability to create or produce goods or services serving the same purposes. This now creates a competitive market that is beneficial to the consumer. Economist use terms such as complements and substitutes to explain these policies. Substitutes A substitute product or service is basically another product or services that could be used for the same purpose (Economics Help, 2013). Usually a substitute product is less expensive thus creating a positive elasticity into the market. With the price increase of a product, the substitute product will become more appealing to the consumer. Colander (2013) compared the Big Mac and the Whopper, when the price of the Big Mac goes up people shift to the Whopper as a substitute product. An economic substitute applies to the sports world also, when a team tries to hire a high profile player. The...
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...of Social Science Department of Economics B00303118 Dear Professor or whoever may concern, Due to lack of fund I was not able to buy our syllabus yet, and I was not able to complete the suggested homework. So, instead of doing nothing, I have decided to hand in my personal simplified summary. I will get my syllabus as soon as possible, I apologize for your inconvenience. Best regards, Joseph Niehl Baron *********************************************************** Chapter II: Thinking like an Economist Principle of Economics 1. Every field has it’s own language and it’s own way of thinking. 2. The Economist as Scientist a. Economists two roles: Scientists / Policy advisors b. Devise theories, collect data, analyze data to verify or refute c. Scientific method: Observation and theory 3. Assumptions and models a. Assumptions can simplify the complex world and make it easier to understand b. Use models to learn about and illustrate the world. c. First model: The circular flow diagram: is a visual model of the economy that shows how dollars flow through markets among households and firms. d. Second model: The production possibilities frontier: is a graph that shows the various combinations of output that the economy can possibly produce given the available factors of production and the available production technology 4. Microeconomics and Macroeconomics a. Microeconomics: is the study of how households...
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...Definitions: Alfred Marshall - "a study of mankind in the ordinary business of life" Milton Friedman - "is the science of how a particular society solves its economic problems." Lionel Robbins - "the science which studies human behavior as a relationship between ends and scarce means which have alternative uses." David Simon - Economics is a social science that attempts to use the scarce resources to attain a maximum fulfillment of mans' unlimited wants. Scarcity: All economic questions arise from a single and inescapable fact: you can't always get what you want. (We live in a world of scarcity) Scarcity is define to mean- wants always exceed the resources available to satisfy them. Wants do not simply exceed resources, they are unlimited. Scarcity is a relative concept as opposed to an absolute concept. 1) Good: Anything that gives one utility or happiness or pleasure or satisfaction. 2) Bad: Anything that gives one disutility or unhappiness or displeasure or dissatisfaction. Free good vs. Economic goods Choice: Scarcity implies choice (scarcity → choices): Choice is the act of selecting among restricted alternatives. Optimization vs. economization OPPORTUNITY COST: Choices imply opportunities (choices → opportunity cost) Can one make a choice without incurring a cost? The answer is NO. Choice naturally implies cost and because scarcity implies choice, we conclude that scarcity indirectly implies cost. Thus the concepts scarcity...
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...------------------------------------------------- Chapter 1—Introducing the Economic Way of Thinking MULTIPLE CHOICE 1. When economists say scarcity, they mean: a. | there are only a limited number of consumers who would be interested in purchasing goods. | b. | the human desire for goods exceeds the available supply of time, goods and resources. | c. | most people in poorer countries do not have enough goods. | d. | goods are so expensive that only the rich can afford it. | ANS: B PTS: 1 DIF: Easy REF: Full: 3 | Mic: 3 TOP: Scarcity TYP: RE 2. When economists say goods are scarce, they mean: a. | consumers are too poor to afford the goods and services available. | b. | consumers are unwilling to buy goods unless they have very low prices. | c. | goods are generally freely available from nature in most countries. | d. | the desire for goods and services exceeds our ability to produce them with the limited resources available. | ANS: D PTS: 1 DIF: Medium REF: Full: 3 | Mic: 3 TOP: Scarcity TYP: SA 3. Scarcity is a problem: a. | measured by the amount of goods available. | b. | of the poor, but not the rich. | c. | because human wants are unlimited while resources are limited. | d. | only in industrialized economies. | ANS: C PTS: 1 DIF: Easy REF: Full: 3 | Mic: 3 TOP: Scarcity TYP: RE 4. Scarcity can be eliminated if: a. | people satisfy needs rather than wants. | ...
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...production technology Microeconomics- the study of how households and firms make decisions and how they interact in markets Macroeconomics- the study of economy-wide phenomena, including inflation, unemployment, and economic growth Positive Statements- claims that attempt to describe the world as it is Normative Statements- claims that attempt to prescribe how the world should be The Economist As Scientist Economists view subject with objectivity devise theories, collect data, analyze data use scientific method The Scientific Method: Observation, Theory, And More Observation interplay between theory and observation experiments difficult in economics: have to look to history allows us to examine present and predict future The Role Of Assumptions economists make assumptions to make the world easier to understand two countries, two goods applying correct assumption to right data different assumptions for short0run and long-run effects of a change in the quantity of money Economic Models models not often real but are accurate and helpful economists use diagrams and equations omit details to show what’s truly important models are built with assumptions Our First Model: The Circular-Flow Diagram simplifies our thinking about economic activities explains generally how economy is organized and how participants interact two types of decision makers (households and firms) inputs=factors of production markets for goods and services vs markets for factors of...
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