That's right, we have to make choices because resources are limited or scarce.Think of the resource time. What kind of choices do you have to make everydayto satisfy your wants given your limited time?
In making choices people respond to
, which are the rewards we receivewhen we choose to engage in particular activities.
Macroeconomics and Microeconomics
We can think of economics as consisting of two major branches: Macroeconomics andMicroeconomics.
(macro for short) is the study of the economy as a whole or economic aggregate. Can you think of examples of topics that fall under thesubject of macroeconomics?Click here for answer.
Correct. The unemployment rate, inflation, interest rates, the governmentbudget deficit or surplus, and GDP (Gross Domestic Product) are allexamples of topics that we study in macroeconomics.Microeconomics
(micro for short) is the study of specific markets, individuals,and firms in the economy. A few examples of microeconomic topics are:
What determines the demand and supply for cars or pizza?
How does an individual decide how much time to spend working or takingvacation?
How does a business decide how much to produce?We will see later as the semester progresses that often times, we need to blend Microand Macro analyses in order to answer some questions about the economy. For example, to understand what determines the amount of jobs available in the economy,or unemployment, we use a demand and supply model of the labor market along withan aggregate demand and aggregate supply model of the aggregate economy's level of production.