Question

Which of the following would be most closely related to microeconomics?

The extent to which people leaving the labor force affects unemployment.

How rising wages affect the choice of working instead of going to school.

How rising prices cause standards of living to fall.

The effect of improving consumer confidence on economic growth.

Explain your reasoning:

Answer 1

Ans) Microeconomics studies the economies within the national economy. That is, it focuses on small segments like consumer behaviour, particular market segment etc.

On contrary, macroeconomics takes into account the whole economy. And therefore studies aggregate demand/supply, employment/unemployment, inflation etc.

Here option b is more closely related to microeconomics because it is trying to study the consumer behaviour that how consumers react on increasing wages.

Whereas option a, c and d are trying to study the bigger picture. As option a talks about unemployment, which is studied at national level. Option c talks about standard of living, which again is microeconomic concept as we define standard of living of a country. And option d talks about effect of consumer confidence on economic growth which is macroeconomic concept as growth is defined of whole economy and not of any particular segment.