KW_Macro_Ch_06_Sec_01_Microeconomics_Versus_Macroeconomics

KW_Macro_Ch_06_Sec_0 - chapter 6 > Macroeconomics The Big Picture Section 1 Microeconomics versus Macroeconomics Table 6-1 lists some questions

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>> Macroeconomics: The Big Picture Section 1: Microeconomics versus Macroeconomics chapter 6 Table 6-1 lists some questions that are often asked in economics. A microeconomic version of the question appears on the left paired with a similar macroeconomic question on the right. By comparing the questions, you can begin to get a sense of the difference between microeconomics and macroeconomics. As you can see, microeconomics focuses on how decisions are made by individuals and firms and the consequences of those decisions. For example, we use microeco- nomics to determine how much it would cost a university or college to offer a new course—a cost that includes the instructor’s salary, the cost of class materials, and so on. The school can then decide whether or not to offer the course by weighing the costs and benefits. Macroeconomics, in contrast, examines the aggregate behavior of the economy—how the actions of all the individuals and firms in the economy inter- act to produce a particular economy-wide level of economic performance. For exam- ple, macroeconomics is concerned with the general level of prices in the economy and how high or how low they are relative to prices last year, rather than focusing on the price of one particular good or service.
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You might imagine that macroeconomic questions can be answered simply by adding up microeconomic answers. For example, the model of supply and demand we introduced in Chapter 3 tells us how the equilibrium price of an individual good or service is determined in a competitive market. So you might think that applying sup- ply and demand analysis to every good and service in the economy, then summing the results, is the way to understand the overall level of prices in the economy as a whole. But that turns out not to be the case: although basic concepts such as supply and demand are as essential to macroeconomics as they are to microeconomics, answer- ing macroeconomic questions requires an additional set of tools and an expanded frame of reference. We will develop the required tools in the chapters ahead. We’ll start by developing the wider viewpoint that characterizes macroeconomics, and we’ll consider four principal ways in which macroeconomics differs from microeconomics. 2 CHAPTER 6 SECTION 1: MICROECONOMICS VERSUS MACROECONOMICS TABLE 6-1 Microeconomic versus Macroeconomic Questions Microeconomic Questions Macroeconomic Questions Should I go to business school or take a job right now? What determines the salary offered by Citibank to Cherie Camajo, a new Columbia MBA? What determines the cost to a university or college of offering a new course? What government policies should be adopted
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This note was uploaded on 04/10/2008 for the course ECONOMICS 103 taught by Professor Sheflin during the Spring '08 term at Rutgers.

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KW_Macro_Ch_06_Sec_0 - chapter 6 > Macroeconomics The Big Picture Section 1 Microeconomics versus Macroeconomics Table 6-1 lists some questions

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