Intorduction to Economics Pt. 2
Welcome back to LearnBiz, and back to our “Introduction to Economics”. This is currently part 2 of our “Introduction to Economics” posts, if you would like to see part 1, you can do so here.
It’s been a bit since part 1, so if you are following along, be sure to check out part 1 in order to get a refersher before we continue.
Without further ado, welcome to Microeconomics and Macroeconomics.
Microeconomics
First off, lets start with a definition of “Microeconomics”
Microeconomics- is concerened with decision making by individual customers, workers, households and busienss firms.
Microeconomcis is basically concerned about the smaller things in our society, such as families, “normal” people and small businesses.
A few key measurements of Microeconomics include:
- Measures price of a specific product
- The revenue of a particular firm or household
- Expenditures of a specific firm, government, entity or family
Macroeconomics
You can probably guess where this is going
Macroeconomics- examines the performance and behavior of the economy as a whole
A few key measurements that Macroeconomics focuses on are:
- economic growth
- business cycle
- interest rates
- infaltion
- behavior of major economcis aggregates (such as government, household and business sectors)
All in all, Macroeconomcis focuses on the “big picture”. Macoreconomics is concerned with the performance of key societal factors such as inflation.
Positive and Normative Economics
We got a couple more topics to cover in this post (yes, this is a shorter post than usual)
Positive Economics- focuses on facts and casue-and-effect relationships. KEY NOTE: postivie economics AVOIDS value judgements
Bascially, positive economics looks at the facts and the reasons behind things. Positive economics keeps the judgements out of the picture.
Normative Economics- incorperates value judgements about what the economy should bel ike or what policy actions should be recommended
I like to think of “Normative Economics” like US Senators. They look at something and decide what it should look like, and then they make changes. The only difference here is that instead of changes against the citizens, Normative Economics focuses on what the economy should be like for both companies and people. It then suggests what policy changes should happen in order to get there.
Positive Economics = What is
Normative Economics = What ought to be
Learn More About Econoimcs
Learn more about econoimcs here
Sources
Much of the information in this is from “Economics 23e” from Campbell R. McConnell, Stanley L. Brue and Sean M. Flynn.
Please note, that this is NOT copied information, but much of what I am stating can be considered a “summarized version” of the information in this book.
