ECONOMIC

MICRO , MACRO, POSITIVE AND

NORMATIVE ECONOMICS
AASEM MOSA DAHESH MOAIDI
KHALAD MOHMAD SALMAN GAZWINY
RAAD MOSA GASEM MANGRI
ALBARAA YOUSEF ALI FAGEEH
ABDULELAH SALM ABDOH KHABRANI

DR. ABDULVAHED
 Microeconomics

Microeconomics is a branch of economics that

studies the behavior of individuals and firms in
making decisions regarding the allocation of
scarce resources. It focuses on how these
decisions affect the supply and demand for goods
.and services, and ultimately determine prices

The study of microeconomics is important

because it helps us understand how individuals
and firms make decisions in a world of g
scarcity. By understanding the principles of
microeconomics, we can make better decisions
about how to allocate our own resources and how
to design policies that promote economic growth
.and development
 Supply and Demand

•One of the central concepts in microeconomics is

the law of supply and demand. According to this
law, the price of a good or service will adjust until
the quantity demanded by consumers equals the
quantity supplied by producers.

•Changes in either demand or supply can shift the

equilibrium price and quantity of a good or service.
For example, an increase in demand for a product
will cause the price to rise and the quantity sold to
increase, while a decrease in supply will cause the
price to rise and the quantity sold to decrease.
 Market Structures

•There are four main types of market structures

in microeconomics: perfect competition,
monopolistic competition, oligopoly, and
monopoly. Perfect competition is characterized
by a large number of small firms selling identical
products, while monopoly is characterized by a
single firm selling a unique product with no close
substitutes.

•Monopolistic competition and oligopoly fall

somewhere in between these two extremes, with
some degree of product differentiation and
market power among firms. Understanding these
different market structures is important for
analyzing the behavior of firms and predicting
market outcomes.
Production and Cost Analysis and Consumer
Behavior

•Production and cost analysis is another

important area of microeconomics. It involves
examining how firms make decisions about what
to produce, how much to produce, and what inputs
to use in production. It also involves
Understanding Consumer Behaviour and
analyzing the costs associated with production,
including fixed costs, variable costs, and marginal
costs.

•Understanding production and cost analysis is

important for firms when making decisions about
pricing, output levels, and production methods. By
minimizing costs and maximizing profits, firms
can achieve long-term success in competitive
markets.
 Cont…

•In microeconomics, consumer behavior refers to

the actions and decision-making processes of
individuals when they purchase goods and
services. It involves analyzing factors such as
preferences, budget constraints, and the
availability of information.

•One of the key models used in analyzing

consumer behavior is the theory of utility
maximization. This theory posits that consumers
aim to maximize their satisfaction or utility
subject to their budget constraint. By
understanding consumer behavior, firms can
better tailor their products and marketing
strategies to meet the needs and wants of their
target customers.
 MACROECONOMICS

Definition: Macroeconomics is the branchof

economics that studies the behavior and
performanceof an economy as a whole. It focuses
on the aggregate changes in the economy such as
unemployment, growth rate, gross domestic
product and inflation.

Description : Macroeconomics analyzes all

aggregate indicators and the microeconomic
factors that influence the economy. Government
and corporations use macroeconomic models to
help in formulating of economic policies and
strategies
What are 3 major concerns of macroeconomic

1- unemployment level
2- inflation ( increase in prices )
3- economic growth

Main objectives of macroeconomic

1- low levels of inflation

2- low rate of unemployment
3- equitable distribution of income in country
4- there should be an equilibrium in the balance
of payments of nation

Why macroeconomic important

Macroeconomic help the government in evaluate

how economy is performing and decide on actions
it can take to increase or decrease growth
MICROECONOMICS VS MACROECON OMICS
 Normative Economics

Normative economics is a perspective on economics

that reflects normative, or ideologically prescriptive
judgments toward economic development, investment
projects, statements, and scenarios.
 examples of normative statements:

Women should earn the same salary as men.

People should drive electric cars instead of

consuming fossil fuels.

Companies should not use child labor.

Normative statements cannot be tested or proved,

and they typically contain keywords such as
"should" and "ought."
 Advantages of normative economics

It can help determine and categorize different

facets of economics as good or bad

It focuses on increasing the usefulness of

available options by offering perspective
pragmatics .

It provides the flexibility and freedom to express

opinions

It reflects the ' what if ' phase of economic

policies .
 Disadvantages of normative economics

It consists of opinions ; no facts are available to

verify their correctness .

It involves ideological considerations , as real

scenarios have multiple variations .

In this case , decision - makers rely on

assumptions without the topic's thorough
understanding .

It is impossible to test , verify and create a stable

market .
 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. It attempts to establish any
cause-and-effect relationships or behavioral
associations which can help ascertain and test the
development of economic theories.
 Examples of Positive Economics:

* Monopolies have proved to be inefficient

* The desired rate of return on gambling stocks are
higher compared to others
* The relationship between wealth and demand is
inverse in the case of inferior goods
* House prices reduce once the interest rate on
loans get higher
* Car scrap page schemes can result in a fall in the
prices of second hand cars
Positive economic VS normative economic

Positive economics describes and explains various

economic phenomena.
Normative economics focuses on the value of
economic fairness, or what the economy "should be"
or "ought to be."
While positive economics is based on fact and
cannot be approved or disapproved, normative
economics is based on value judgments.