Question

Discuss how the “all other things equal” assumption and the fallacy of composition explain the distinctions between macroeconomics and microeconomics.

Answer 1

All other things equal is an assumption used in Economic analysis that often known as in latin ''Ceteris paribus'.

This is used when the relation between two Variables such as price and quantity.

This concept is important in Economics because in the reality it is difficult to isolate the variables or change the outcome.

This phrase is commonly used as an assumption to the anticipating purpose of inspection.

Fallacy of composition infers something that is true from the fact of the whole or every part.

This was mentioned during the meeting because we didn't have samples to draw meaningful data.

Fallacy of composition is the opposite of division, which is compared with the case of emergence where the properties not present in the past.

Micro Economics:-is the study of an Economy as a whole.

Where as where as macro Economic focusses on issue that affect individuals and companies.

Micro economics is the study of economics at a smaller scale.

Where as macro Economic is the study of large scale Economic issues.

In micro economics inflammation raises the prices of goods and services which has serious effects for individual and business.

In case of macro Economic,Infla Inflation and rise in cost of living affect.