You are on page 1of 4

Microeconomics Macroeconomics

Study of the economic behavior of individual Macroeconomics refers to the study of


units of an economy such as a person, economics, so looking at concepts like
household, firm, or industry. industry, country, or global economic factors.

Microeconomics is primarily concerned with Macroeconomics includes looking at concepts


the factors that affect individual economic like a nation's Gross Domestic Product (GDP),
choices, the effect of changes in these factors unemployment rates, growth rate, and how all
on the individual decision makers, how their these concepts interact with each other.
choices are coordinated by markets, and how Studying and applying macroeconomics is
prices and demand are determined in individual incredibly important at the government level as
markets. the policy and economic decision and
regulations enacted by government

Scarcity:
Scarcity is an economics term used to refer to a gap between insufficient resources and the many
theoretical needs that people expect to be met by the said resource. As a result, people are forced
to decide how best to allocate a scarce resource in an efficient manner so that most of the needs
and those additional wants can be met.

Example, Limited Stock Notice scarcity causes items to seem very popular, particularly for
online buyers, many online sellers tend to leverage limited stock notices on urgent or immediate
basis.

Opportunity Cost:
Opportunity cost is one of the key concepts in the study of economics and is prevalent
throughout various decision-making processes. Opportunity is the value of the next best
alternative foregone. In simplified terms, the opportunity cost is the cost of what else could have
been.

Example, However, if a decision maker must choose between Decision A or B, the opportunity
cost of Decision A is the net benefit of Decision B and vice versa.
Positive Economics:
Positive economics is a stream of economics that focuses on the description, quantification, and
explanation of economic developments, expectations, and associated phenomena. It relies on
objective data analysis, relevant facts, and associated figures.

Here's an example "Government-provided healthcare increases public expenditures." This


statement is fact-based and has no value judgment attached to it. Its validity can be proven (or
disproven) by studying healthcare spending where governments provide healthcare.

Normative Economics:
Normative economics focuses on the ideological, opinion-oriented, prescriptive, value
judgments, and "what should be" statements aimed towards economic development, investment
projects, and scenarios.

An example:" The government should provide basic healthcare to all citizens." As you can
deduce from this statement, it is value-based, rooted in personal perspective, and satisfies the
requirement of what "should" be.

Non Price Determinants of Demand:


The non-price determinants of demand. These factors are important, because they can
change the number of units sold of products and services, irrespective of their prices.

Branding, Market size, Marketing, Seasonality, Available income and Complementary goods.
These are called non-price determinants of demand.

Non Price Determinants of Supply:


The non-price determinants of Supply. These factors are important, because they can change
the number of units sold of products and services, irrespective of their prices.

Changes in Production technology, Cost of Factor Inputs (Resources), Number of Sellers in the
Market, Prices of Related Substitute Goods, and By-products.

Comparative Static Analysis:

In comparative static analysis, When supply and demand condition match for any specific
product in a market at suitable condition that develop equilibrium of demand and supply. when
there is a change in the factors which establish equilibrium of demand and supply, a new
equilibrium position comes into being. Comparative static economics studies the comparison of
the old and new equilibrium positions. It does not study the path of change..
This method of analysis is called comparative statics. For example, when the demand as well as
the supply of onions is 50 kgs., price is one Re. per kg. Now suppose the demand increases to 6
kg’s. While supply remains the same. Price of onions increases to Rs. two per kg. The study of
the two equilibrium prices of onions is called comparative economic statics.

Substitute and Complement goods in Consumption side:

In Consumption side, we can say that Coffee and Tea both are substitute good for each other
and consumption of both goods are affected if price varies of one alternative that influence on
demand and supply behavior.

On the other hand, Complement refers to a complementary good or service that is used in
conjunction with another good or service. Usually, the complementary good has little to no value
when consumed alone, but when combined with another good or service, it adds to the overall
value of the offering. Like water is mandatory to make Tea or Coffee and it became a
complement good for both. If water supply is affects by varying price then it disturbs the
behavior of demand and supply of Coffee and Tea

Substitute and Complement goods in Production side:

In Production side, brownies and cakes are substitutes for a producer, because by producing one
more brownie, it is giving up some about of cake. This means that if the company can get higher
returns on cake), then it will produce more cake. Thereby increasing the supply of cake and
reducing the supply brownies even if the price of brownies remain unchanged. And substitute
affect supply because producers have to produce less of something to produce more of something
else.

Contrary, Wheat and milk which is complement good for both making brownies and cake and it
adds to the overall value of the offering both products.