Question

1. What is the difference between microeconomics and macroeconomics? Provide an example of each.

2. Price discrimination. How can this be a good thing for you personally?

3.   Illustrate (draw) and explain the Laffer Curve. Where are we currently as a nation (in your opinion) on the Laffer Curve?

Answer 1

As per the policy and time constraint I am answering, question 1 only. Kindly ask other questions policy in another go.

ans1 ) Microeconomics- As the name suggests, micro means small. Microeconomics is the study of the behaviour of an individual or a single firm in decision making and allocating the resources. Here we study the factors that affect the individuals economic choices. It studies how an action affects utilization and distribution of scarce resources. It shows how and why different goods have different values. It deals with price and production within a single market.

Example- Your money is limited and you decide to allocate that amount as efficiently as possible, this we study as allocation of scarce resources.

Suppose you had one scoop of ice cream, it gave u a lot of joy. As you keep on increasing the number of scoops, the amount of satisfaction received with every increasing scoop will decrease. This we study as diminishing marginal utility.

Macroeconomics- Macro means large. And in macroeconomics we study the decision, behaviour, performance etc in an economy as a whole. It includes phenomenon which affects economy as a whole. It studies aggregate changes in economy. Phenomena like inflation, deflation, unemployment etc fall under the study of macroeconomics. The concepts of aggregate demand and supply are used here instead of just demand and supply.

Example- The decrease in overall demand in an economy affects the investment , expenditure, tax policy etc.

How increase in money supply in an economy as a whole influences inflation, wages , employment etc.