Question

o Microeconomics vs macroeconomics

o Real versus a nominal goods

o Normative vs positive analysis

o Theories and what makes them good/bad o

Three assumptions about market participants

o Making decisions with sunk costs

o Production Possibilities Frontier (PPF)

 What it represents  Opportunity costs and its effect on the shape of a PPF

 Calculating opportunity cost across the curve

Answer 1

Microeconomics vs Macroeconomics-

1) Microeconomics studies the behavior of individuals and firms in making decision regarding the allocation of scarce resources

Macroeconomics deals with behavior, decision making of an economy as a whole includes regional, national, international.

2) Example of microeconomics- Interaction among buyers and sellers in market and set equilibrium price and quantity

Example of macroeconomics- When economy heat by a recession, total employment fall.

3) Government policy in microeconomic- Government wants to increase social wellfare, for an example government wants to increase consumer surplus. The Government will set a binding price ceiling below the market equilibrium

Government policy in macroeconomics- When economy heat by a recession, the government takes expansionary fiscal policy, expansionary monetary policy. The expansionary fiscal policy includes increase government expenditure, decrease tax etc. The expansionary monetary policy includes increasing money supply, decrease reserve requirement ratio etc.