INTRODUCTION TO MACROECONOMICS

AND MICROECONOMICS

TABLE OF CONTENT

⬜ WHAT IS ECONOMICS ?⬜ WHY STUDY ECONOMICS ?⬜ BRANCHES OF ECONOMICS⬜ INTRODUCTION TO MACROECONOMICS⬜ EXAMPLES OF MACROECONOMICS⬜ CONCERNS OF MACROECONOMICS⬜ INTRODUCTION TO MICROECONOMICS⬜ EXAMPLES OF MICROECONOMICS⬜ CONCERNS OF MACROECONOMICS⬜ CONCERNS OF MACROECONOMICS

WHAT IS ECONOMICS ?

⬜ Economics is the study of various aspects that impact the market at micro level or macro level like production of goods and services along with their distribution and consumption.

WHAT IS ECONOMICS ?

⬜ Economics is the study of scarcity of resources and the usage of resources.

⬜ It is concerned with the consumption of wealth and transfer of wealth.

WHY STUDY ECONOMICS ?

⬜ To understand the world better.⬜ Economics is important to achieve social change.⬜ Different conclusions from different economists.

BRANCHES OF ECONOMICS

There are two branches of economics :⬜ MACROECONOMICS⬜ MICROECONOMICS

INTRODUCTION TO MACROECONOMICS

⬜ Macroeconomics is the study of entire economy of a country where it is studied and analyzed as a whole with factors like, unemployment, inflation and interest rates.

INTRODUCTION TO MACROECONOMICS

⬜ Macro comes from the Greek work Macros, meaning large.

⬜ Macroeconomics examines the behavior of economic aggregates.

⬜ It focuses on big things and ignores unnecessary details.

EXAMPLES OF MACROECONOMICS

⬜ Increase in government interest rate⬜ Reaction of CEO⬜ Selling of financial assets in order to save money⬜ Fall in stock prices⬜ Payment of debts

CONCERNS OF MACROECONOMICS

There are three major concerns of macroeconomics :⬜ INFLATION⬜ OUTPUT GROWTH⬜ UNEMPLOYMENT

INFLATION

⬜ Inflation is defined as an increase in level of prices of goods.

⬜ Inflation results in loss of value of money.⬜ When the general price level rises, each unit of

currency buys fewer goods and services.

CAUSES OF INFLATION

There is no universal cause for inflation. But there are two theories of inflation that are generally accepted.⬜ DEMAND-PULL INFLATION⬜ COST-PUSH INFLATION

DEMAND-PULL INFLATION

⬜ When demand is growing faster than supply, prices will increase, which results in growing economies.

COST-PUSH INLATION

⬜ When company cost goes up, they increase the prices to maintain their profit margins.

VARIATIONS OF INFLATIONThere are several variations of inflation :

DEFLATION⬜ This is the opposite of inflation. ⬜ When there is decline in the prices of goods.⬜ Deflation increases the value of money and allows

you to buy more goods with the same amount of money over time.

⬜ Prolonged periods of deflation can damage the economy of a country.

VARIATIONS OF INFLATION

HYPERINFLATION⬜ Hyperinflation is the unusual rapid inflation.⬜ Hyperinflations are rare.⬜ Hyperinflations used to study the cost and effects of

moderate inflation.

VARIATIONS OF INFLATION

STAGFLATION⬜ Stagflation refers to economic condition where

economic growth is very slow or stagnant and prices are rising.

PROBLEM ARISES DUE TO INFLATION

⬜ When inflation rate is greater than that of other countries, domestic products become less competitive.

⬜ People living off a fixed-income, such as retirees, see a decline in their purchasing power and, consequently, their standard of living.

⬜ Creditors lose and debtors gain if the lender does not anticipate inflation correctly. For those who borrow, this is similar to getting an interest-free loan.

INTRODUCTION TO MICROECONOMICS

⬜ Microeconomics is the study of interaction of individual within a market structure with factors like demand and supply, budget constraints and monopoly.

INTRODUCTION TO MICROECONOMICS

⬜ Microeconomics is the study of individuals.⬜ Microeconomics focuses on demand and supply.⬜ Microeconomics is concerned with the maximizing

the production to compete in the industry.

EXAMPLES OF MICROECONOMICS

⬜ Opportunity Cost may use to assign monetary values

⬜ Must give up something else⬜ Sunk cost⬜ Role in the decision making process

CONCERNS OF MACROECONOMICS

⬜ The basic concern of microeconomics is ⬜ To prove that capitalism is better than socialism.⬜ To study the choices of people.⬜ Use unlimited resources to satisfy limited wants by

producing goods and services.

CONCLUSION

⬜ Economics is not only a subject but it is a backbone for analyzing, researching and writing, teaches about economic and financial issues.

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