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In: Economics

1. Distinguish between microeconomics and macroeconomics. Do you think that the assumptions underlying the two are...

1. Distinguish between microeconomics and macroeconomics. Do you think that the assumptions underlying the two are the same? State the assumptions briefly and evaluate them from a welfare viewpoint.?

can u add an example

Solutions

Expert Solution

Microeconomics is the study of economic decision of a specific individual or firm .

1 Individual markets behavior for demand and supply

2 prices of goods

3 individual labour markets eg demand for labor and wage rate

4 individual consumer behavior

So it is bottom up approach

Macroeconomics is the studies behavior of whole economy and how policies in a country affects the economy as a whole

1 Whole economy that is GDP

2 aggregate prices and inflation and effect

3 level of employment or unemployment in a country

4 effective aggregate demand and affects on output and income

It is top down approach

No assumptions in both are different

Microeconomics takes assumptions of macro economics like aggregate price level, technology changes, expectations etc as constant

Macroeconomics take assumptions of microeconomics like rational consumers, law of demand etc as constant

Welfare economics

Micro theory of distribution explains how rates of rewards for various factors of production are determined

It relates to functional distribution that is theory of factor pricing and welfare

Macro theory of distribution deals with problem of determination of aggregate rewards of various factors in national income means relative shreshth of various factors in national income.

National income of distribution is e uitable or not

Rahul Sunny answered 2 years ago
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