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Unformatted text preview: *:€ELL¢'" 6 $ 0 Q E] httpsufwwwmhlearnsmartcom/flew/smartheok.htn ' ~/ Tonotcvtri) . «Tooting 9 gr impnnanrtctmzi 7‘“§rmarags A DEE lCallbii . i1 v 3e 7 .: Economies - The Micro Economy Today - Schiller, Gebhardt.14e. Economics: The Core Pam g I Q ‘95 K2 ' '7 ' A. ' g ‘ >< Swlfi ? Qumrontcnoa) ‘ Em" . . Page Clipboard cannon Styles Tags Email 0 CHAPTER 1: EGUNOM EC: Sequoya @ Tallahassee Com... - ; QuickNdls Searmmm‘e business investment. while micro examines how individual businesses make their invest- ment decisions. Although they operate at ditferent levels of abstraction. macro and micro are intrinsii cally related. Macro (aggregate) outcomes depend on micro behavior. and micro (individ- ual) behavior is affected by macrooulcomcs. One can’t fully understand how an economy works until one understands how all the individual} participants behave. But just as you can drive a car without knowing how its engine is constructed you can observe how an econ— omy runs without completely disassembling it. In macroeconomics we observe that the car goes faster when the accelemtm is depressed and that it slow: when the brake is applied. That‘s all we need to know in most situations. At times. however, the car breaks down. When it does. we have to know something more about how the pedals work. This leads us into micro studies. How does each part work? Which ones can or should be fixed? Our interest in microeconomics is motivated by more than our need to understand how the larger economy works. The “parts" of the economic engine are people. To the extent that we care about the well-being of individuals. we have a fundamental intelest in micro- economi'c behavior and outcomes, In this regard, we examine how individual consumers and business firms seek to achieve specific goals in the marketplace. The goals aren‘t al- ways related to output. Gary Becker won the 1992 Nobel Prize in Economics for demon, strafing how economic Finciples also affect decisions to marry, to have children. to engage in criminal activitieswr even to complete homework assignments in an economics class. options the government has and how and when they might work}. WHAT ECONOMICS IS ALL ABOUT CHAPT Understanding how economies function is the basic purpose of studying economtcs. We seek to know how an Economy is organized. how it behaves, and how successfully it achieves its basic objectives. Then, if we're lucky, we can discover better ways of attainingthose same objectives. Normative V5. Positive Analysis The distinction between and; and means is mirrored in the difference between normative analysis and positive analysis. I Normative analysis, incorporates subjective judgments about what ought to be done. i. Heritage slides into normative analysis when it suggests that market reliance is tantamuum to "economlc freednm" and inherently superior to more government intervention —that markets are good and governments are bad. I Positive analysis, focuses on how things might be done without subjective iudgments of what is "best." i. The Heritage Index of Economic Freedom (M View, page 16), for example, constitutes a positive analysis to the extent that it objectively dacribes global diflerences in the extent of market reliance. This effort entails collecting, sorting, and ranking mountains of data. Theory vs. Reality The distinction between macroeconomics and microeconomics is one of many simplificai tions we make in studying economic behavior. The economy is much too vast and complex to describe and explain in one course (or one lifetime). Accordingly. we focus on basic re Ialionships. ignoring annoying detail. In so doing, we isolate basic principles of economic behavior and then use those principles to predict economic events and develop economic Debates overthe Dore FDR WHOM question likewise reflect both positive and normative analysis. A positive analysis would observe that the U5. incomes are very "unequal," with the richest 20 percent of the population getting half of all income. --that is an observable fact. that is positive analysis/[[1710 characterize that same distribution as "inequitable" or "unfair“ is to transform (positive) fact into (normative) Judgment. Economists are free, of Course, in offer their judgments but must be careful to distinguish positive and normative perspectives. Me Graw Hill tuner-av << e 19 I 510 a >> fl A A E 0 Type here to search ...
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