Professional Documents
Culture Documents
o
o
Macroeconomics
Consumers
expectations
the future.
o
o
Expectations of profits by
firms.
Households expectations
of the future.
Producers expectations of
future profits.
of
Interest rates.
Productions costs.
Household income
available.
Technology.
Household income.
Economic growth.
Household
accumulated
wealth.
Costs of production.
o Labor
o Raw materials.
o Other inputs.
Household wealth.
Public policy:
o Business tax rates.
o Regulation
or
deregulation.
o Environmental policies.
Consumer tastes
and preferences.
Business
subsidies.
Business taxes.
Consumer indebtedness.
Weather.
The number of
households
demanding a good
or service.
The
number
suppliers.
The
number
consumers.
Demand
goods.
World
demand
domestic goods.
Exchange rates.
taxes
Microeconomics
and
of
for
of
foreign
for
Macroeconomics
In macroeconomics:
o There are no:
o Substitute goods or services.
o Complimentary goods and services.
o Normal goods and services.
o Inferior
goods
and
services
=>There are just aggregate goods and
services.
o Ceteris paribus is not an issue in macroeconomics.
o We do not care why consumers make individual
choices. We are not concerned with:
o Price elasticity of demand.
o Budget constraints of consumers.
o Marginal utility of consumers.
o Firms (producers) are simply firms (producers).
We do not worry about whether a firm is:
o A perfect competitor.
o
o
o
o A monopolist.
o In monopolistic competition.
o An oligopolist.
We do not concern ourselves with the size or
behavior of the firm in macroeconomics.
We still emphasize the concept of opportunity
costs, but we now apply that concept to whole
economies or societies.
You will not hear the phrases marginal cost or
marginal revenue. These two concepts are not
an issue in macroeconomics.
Allocative Efficiency
Definition of allocative efficiency. This occurs when there is an optimal
distribution of goods and services, taking into account consumers
preferences.
A more precise definition of allocative efficiency is at an output level where
the price equals the Marginal Cost (MC) of production. This is because the
price that consumers are willing to pay is equivalent to the marginal utility
that they get. Therefore the optimal distribution is achieved when the
marginal utility of the good equals the marginal cost.
Example using diagram
If the marginal cost was 10, and
people were only willing to pay 5
for the good (at output 5), this is
allocatively inefficient. This is
than the cost of producing. The
inefficient.
and the price was 10 . The price
suggesting under-consumption. If
would benefit from enjoying more
allocatively
of 8.
efficient
Firms in perfect competition are
said to produce at an allocative
efficient level because at Q1
P=MC
Monopolies allocatively inefficient
Monopolies can increase price above the marginal cost of
production and are allocatively inefficient. This is because
monopolies have market power and can increase price to reduce
consumer surplus.
Monopoly sets a price of Pm. This is allocatively inefficient because
Price is greater than MC.
Alloactive efficiency would occur at the point where the MC cuts the
Demand curve so Price = MC.
who is an entrepreneur can best be described as a risktaker. Entrepreneur is the person who identifies as a
need not met by the market as yet, new markets for
existing product and new process by which products can
be made.
High unemployment in a country will tend to have more
economic problems and social problems. Such problems
are, higher crime rates and corruption activities happen
as people may resort to illegal means to get money.
Other problem such as health problem and malnutrition
as since some people will not earn enough to eat or to
have a proper dish. Moreover, a high unemployment rate
generally indicates an economy in recession with few job
opportunities. The country must achieve these economic
goals because they has to minimise the high
unemployment. Low unemployment can increases the
country economics to achieve a stable economics.
Equitable Distribution of Income and Wealth
Distribution in economics refers to the way total output or
income is distributed among individuals or among the
four factors of production. These economic goals it is
important for every country to have a fair distribution of
economic and wealth among its people. The gap
between the rich and the poor in a country mist not is
great or big. An equitable distribution resource allocation
system has to be practice by the government of each
country.
Wealth in economics is the net worth of a person,
household, or nation, that is, the value of
all assets owned net of all liabilities owed at a point in
time. In economics, income is the flow that is, measured
per unit of time of revenue accruing to a person or nation
from
labour
services
and
from
ownership
of land and capital. This is a very important economic
goal for the government to achieve because it
encourage the less fortunate people to have education
and to able stand on their own feet. It also reduce social
problems such as theft, burglary, murder and many
more, if the people are educate and have a good job. It
is also to left people have fair chance in competing and
surviving in a rigid social world.
CONCLUSION
For a country to achieve a stable economic, they must
achieve all the four economic goals. These economic
goals cant be achieved by the government only, the
people of the country also have to contribute they part to
achieve all these goals. By achieving these goals, every
country can have a stable and a good economic and to
support the people of its country.
Question 2
The globalization structure today has created a tendency
which international trade has become an extremely
importance economic resource for most of the countries
in the world. Discuss how Malaysia has benefited from
international
trade.
Five conditions of the mixed economy, including full
employment, stability, economic growth, efficiency, and
equity, that are generally desired by society and pursued
by governments through economic policies. The five
goals are typically divided into the three that are most
important for macroeconomics (the macroeconomic
goals of full employment, stability and economic growth)
and the two that are most important for microeconomics
(the microeconomic goals of efficiency and equity).
A direct reflection of the scarcity problem is that human
beings have always sought ways to improve their lives
and living standards. On a society-wide basis these
actions are commonly guided by the pursuit of generally
accepted economic goals.
First consider the five goals in more detail.
Microeconomic Goals
Efficiency
Five Goals
and equity are the
two microeconomic
goalsmost relevant
to
markets,
industries,
and
parts
of
the
economy, and are
thus important to
the
study
of
microeconomics.
Efficiency:
Efficiency
is achieved
when
society is able to get the greatest amount
ofsatisfaction from
available
resources.
With efficiency, society cannot change the way
resources are used in any way that would
increase the total amount of satisfaction
obtained by society. The pervasive scarcity
problem is best addressed when limited
resources are used to satisfy as many wants
and needs as possible.
While
efficiency
is
indicated
by
equality
between demand price andsupply price for a given
market, there are no clear-cut comprehensive indicators
for attaining this efficiency goal. While it is possible, in
theory, to pinpoint what is needed for efficiency, the
complexity of the economy makes the task difficult to
accomplish in practice.
Equity:
Equity
is
achieved
when income and wealth are fairly distributed
within a society. Almost everyone wants a fair
distribution. However, what constitutes a fair and
equitable distribution is debatable. Some might
contend that equity is achieved when everyone
has the same income and wealth. Others
contend that equity results when people receive
income and wealth based on the value of
their production. Still others argue that equity is
achieved when each has only the income and
wealth that they need.
Equity means income and wealth are distributed
according to a standard of fairness. But what is the
fairness standard? It could be equality. Or it could be the
productive value of resources. Or it could be need.
Standards for equity moves into the realm ofnormative
economics.
Macroeconomic Goals
Full employment, stability, and economic growth are the
threemacroeconomic goals most relevant to the
aggregate economy and consequently are of prime
importance to the study of macroeconomics.
Full Employment: Full employment is achieved
when all available resources (labor, capital, land,
and entrepreneurship) are used to produce
goods and services. This goal is commonly
indicated by the employment of labor resources
(measured
by
the unemployment
rate).
However, all resources in the economy--labor,
capital,
land,
and
entrepreneurship--are
important to this goal. The economy benefits
from full
employment because
resources
produce the goods that satisfy the wants and
needs that lessen the scarcity problem. If the
resources are not employed, then they are not
producing and satisfaction is not achieved.
Stability: Stability is achieved by avoiding or
limiting fluctuations in production, employment,
and prices. Stability seeks to avoid the
recessionary
declines
and
inflationary
expansions of business cycles. This goal is
indicated by month-to-month and year-to-year
business
Market Economy, with respect to the basic moneymaking approaches. While Market Economy tends to
multiply the wealth of a nation through the gradual
process of evolution, Command Economic system
prefers deliberate planning of the entire money-making
process for better results. In fact, such sincere economic
planning in the long run proves beneficial to improve the
economic
conditions
of
a
country.