Question

Essay Topic: Compare and contrast the major
microeconomic failures and macroeconomic
failures.
for an analysis of the problems of individual
markets. analysis of problems in the aggregation
of markets.
Identify and summarize the dynamics involved in
both kinds of market failure presented.
.How are these different economic breakdowns
similar and different?
.what are the best ways to solve these economic
problems and why?
please
please answer by typing

write more than 1 000 words by typing introduction,
4 bodys and conclusion

Answer 1

Answer:

INTRODUCTION:

Economics widely has been categorized into two different segments which are known as

micro economics

and

macroeconomics.

Microeconomics studies the behavior of people, individuals and companies

whereas

Macroeconomics researches the same at the level of the entire nation taken as a whole entity.

Definition of Micro Economics:

Microeconomics is the branch of economics that concentrates on the behavior and performance of individual units, i.e. consumers, family, industry, firms where demand plays a key role in determining the quantity and the price of a product in the economy along with the price and quantity of related goods (complementary goods) and substitute products so as to make decisions regarding the best allocation of scarce resources concerning their alternative uses.

Definition of Macro Economics:

Macroeconomics is the branch of economics that concentrates on the behavior and performance of aggregate variables and mainly focuses on the issues which affects the whole economy. It includes regional, national and international economies and covers the major areas of the economy like unemployment, poverty, stabilizing the general price level, GDP (Gross Domestic Product), imports and exports, economic growth, globalization, monetary/ fiscal policy etc. It helps in resolving the various problems of the economy so that it will function efficiently.

Explanation:

The key variables of micro economics include consumer and market demand, and on the other hand that of macroeconomics includes the demand of the entire nation combined. This is just an example and other variables such as production capacity, labor, capital and other similar policies can be explained accordingly.

Failure of governments and of people alike happens in an economy since all decisions which are taken with a positive outlook may not always result in the same. This happens because at any given point of time any decision has multiple points of delivery therefore, a decision is not reflected upon one single variable but on others also which in turn might not react as intended.

Therefore, failures arise and are common in both the Macro and Micro economic context. Both explained are as follows:-

Micro-economic failures:-

Micro economic failures occur at an individual firm or consumer level and effect the people we are looking at. For example an individual firm, which does not realize whether market demand is sufficient enough to influence the supply increase and therefore occurs a loss by expanding business.

Firms that do not take into perspective that their decision is not independent and has to be taken considering all other variables are most likely to see micro economic failures rapidly.

Macro-Economic Failures:-

Macroeconomic failures, though arise from similar conditions are decisions which are reflective of poor governance. One such incident happened in the United States wherein even after the occurrence of mass recession post the Great Depression, the country did not reduce its interest rates until it realized that it was a counteractive policy.

The government gave various reasons such as devaluation of the currency as a reason for not undertaking interest rate deductions seriously however they failed to realize that unless this happened in a recession, production and demand creation would not increase.

Thus Macro Economic failures are those that happen at the level of the government as a whole and lead to ramifications for the entire society than one single entity.

Differences and Similarities:-

The differences in Macro and Micro economic failures arise from their core difference i.e. that macroeconomics views the entire country as a whole whereas microeconomics is focused on viewing decisions of an individual and a firm respectively. The difference arises thus in the approach and the quantum of each of these.

The similarity occurs, since both are dependent on each other, macroeconomics is all firms combined. With all failing, they would have their effects on all smaller firms also and vice versa i.e. all firms have some contribution towards macroeconomics and failure of them effects macroeconomics also.

Micro Economics

Pros:

    It helps in the determination of prices of a particular product and also the prices of various factors of production, i.e. land, labor, capital, organization and entrepreneur.
    It is based on a free enterprise economy, which means the enterprise is independent to take decisions.

Cons:

    The assumption of full employment is completely unrealistic.
    It only analyses a small part of an economy while a big part is left.

Macro Economics

Pros:

    It is helpful in determining the balance of payments along with the causes of deficit and surplus of it.
    It makes decision regarding economic and fiscal policies and solves the issues of public finance.

Cons:

    Its analysis says that the aggregates are homogeneous but it is not so because sometimes they are heterogeneous.
    It covers only aggregate variables which avoids the welfare of the individual.

CONCLUSION:

Micro and Macro Economics are not contradictory in nature, but they are complementary. As every coin has two aspects- micro and macro economics are also the two aspects of the same coin where one’s demerit is others merit and in this way they covers the whole economy, the only important thing which makes them different is the area of their application.