Exposé Marcro-Micro.pdf

7/28/2019 Exposé Marcro-Micro.pdf

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Economic System

Macro and Micro Economics

Establishment : ISTA Roches Noires

Trainer : Sir Achraf Tribak

Presented by : El Mehdi Lakrouni

Adil Ktite

Sabra Nadfaoui

Group : TSC 04

Session : 2012/2013



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Summary

Introduction………………………………………………………………………3

Economic

System………………………………………………………………………………..4

Macro

economics……………………………………………………………………….…5

Micro

Economics……………………………………………………………………….…6

Difference Between Microeconomics and

Macroeconomics……………………………………………………………

..7

Similarities between Microeconomics and

Macroeconomics….......................................................................8

Supply andDemand……………………………………………………………………………..9

Government Intervention in the

Economy………………………………………………………………………….10



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Introduction Economics is concerned with the optimal distribution of

scarce resources within society. For example, economics is

concerned with how individual decisions like how firms

produce goods and which goods people buy. An important

element in economics is concerned with the extent to which

governments can intervene in the economy to improve

economic welfare. Economics is also concerned with wider

issues such as economic growth and unemployment – issues

that affect the whole of society.



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Economic System:

An economic system is a structure of the functioning of an

economy. The structure basically shows the freedom orrestrictions imposed on the people living in the country in

relation to use of resources of the country for the purpose of

economic growth and economic objectives of the country.

Broadly, there are three types of economic systems namely,

Capitalism, Socialism and Mixed Economy.

Of the present-day economic systems, capitalism is perhaps

the oldest. Though it has come under heavy criticism in the

recent past, it still retains its existence in one of the most

prosperous and powerful countries in the world, USA.,

besides several other smaller countries



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Macro economics:

Macro Economics may be defined as that branch of economic

analysis which studies the behaviour of not one particular

unit, but of all the units combined together. Macroeconomicsis a study of aggregates. It is the study of the economic

system as a whole total production, total consumption, total

savings and total investment. The following are the fields

covered by macroeconomics:

Theory of Income, Output and Employment with its two

constituents, namely, the theory of consumptionfunction, the theory of investment function and the

theory of business cycles or economic fluctuations.

Theory of Prices with its constituents of the theories of

inflation, deflation and reflation.

Theory of Economic Growth dealing with the long-run

growth of income, output and employment.

Macro Theory of Distribution dealing with the relativeshares of wages and profits in the total national income.



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Micro Economics:

Microeconomics may be defined as that branch of economic

analysis, which studies the economic behaviour of the

individual unit, maybe a person, a particular household, or a

particular firm. It is a study of one particular unit rather than

all the units combined together. In microeconomics, we study

the various units of the economy, how they function and how

they reach their equilibrium. An important tool used in that

of microeconomics is that of Marginal Analysis. In fact, it is an

indispensable tool used in microeconomics. Some of the

important laws and principles of microeconomics have beenderived directly from marginal analysis. The following are the

fields covered by microeconomics:

Theory of Product pricing with its two constituents,

namely, the theory of consumer behaviour and the

theory of production and costs.

Theory of Factor pricing.

Theory of Economic Welfare.



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Difference Between Microeconomics and

Macroeconomics

Microeconomics is the study of particular markets, and

segments of the economy. It looks at issues such as consumer

behaviour, individual labour markets, and the theory of firms.

Macro economics is the study of the whole economy. It looks

at ‘aggregate’ variables, such as aggregate demand, national

output and inflation.

Micro economics is concerned with:

Supply and demand in individual markets

Individual consumer behaviour.

Individual labour markets

Externalities arising from production and consumption.

Macro economics is concerned with:

Monetary / fiscal policy. e.g. what effect does interest rateshave on whole economy?

Reasons for inflation, and unemployment

Economic Growth

International trade and globalisation

Reasons for differences in living standards and economic

growth between countries.

Government borrowing



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Similarities between Microeconomics and

Macroeconomics:

Although it is convenient to split up economics into two

branches – microeconomics and macroeconomics, it is tosome extent an artificial divide.

1. Micro principles used in macro economics. If you study

impact of devaluation, you are likely to use same economic

principles, such as the elasticity of demand to changes in

price.

2. Micro effects macro economics and vice versa. If we see a risein oil prices, this will have a significant impact on cost-push

inflation. If technology reduces costs, this enables faster

economic growth.

3. Blurring of distinction. If house prices rise, this is a micro

economic effect for housing market. But, housing market is so

influential that it could also be considered a macro-economic

variable, and will influence monetary policy.4. There have been efforts to use computer models of

household behaviour to predict impact on macro economy.



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Supply and Demand:

The most basic model in economics concerns how the price

and quantity of goods and services is determined. For

example, if demand for a good rose, we observe that thisusually leads to a higher price. This higher price in turn

encourages firms to supply more. This simple model helps

explain a whole variety of different issues and topics. For

example, we can use supply and demand to explain wage

differentials. A lawyer can command a high wage because the

number of qualified lawyers is very low. Cleaners tend to get

lower wages because there are many more people withnecessary qualifications.



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Government Intervention in the Economy:

A continual debate in economics is the extent to which

governments intervene in the economy. On the one hand,

free market economists argue government interventionshould be very limited (e.g. to protection of private property,

national defence). The argument of free market economics is

that governments tend to be inefficient, they don’t have the

same incentives to produce what people want and need. If

you leave it to markets, the ‘invisible hand’ automatically

responds to changes in demand to provide goods that people

want.

On the other hand, other economists argue that the free

market actually creates many problems. In a free market we

may have monopolies, inequality, under-provision of

important public services. Therefore to improve economic

welfare, there is a necessity for governments to raise tax and

spend on public goods not provided by the free market.

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