Introduction to Micro and Macro Economics

Introduction to Micro and Macro Economics

• Microeconomics studies individual agents (like firms and consumers) and their interactions in specific markets.
• Macroeconomics observes the economy as a whole, analyzing broader trends like inflation, unemployment, and economic growth.
• Microeconomics, meaning "small," examines individual components of the economy, such as goods and services, industries, and specific markets.
• Macroeconomics, meaning "large," analyzes the aggregate behavior of the economy, including factors like GDP, inflation, and employment.
• Ragnar Frisch, a Norwegian economist, distinguished microeconomics and macroeconomics in 1933.

Historical Development of Microeconomics

• Microeconomic analysis emerged before macroeconomics.
• Early economists (like Adam Smith, David Ricardo, and J.S. Mill) laid the groundwork.
• Alfred Marshall popularized microeconomics with his "Principles of Economics" in 1890.
• Other prominent economists (like Pigou, Hicks, and Samuelson) contributed to its development.

Historical Development of Macroeconomics

• Macroeconomics developed later, after observing the impacts on the whole economy.
• Early macroeconomic analysis occurred during the 16th and 17th centuries.
• Mercantilist and Physiocrats theories (1700s and 1800s) looked at national income and wealth.
• The Great Depression (1930s) spurred a greater need for macro theory.
• John Maynard Keynes's work in the 1930s was pivotal in developing modern macroeconomics.

Scope of Microeconomics

• Microeconomics examines factors like:
  • Prices and quantities of goods and services
  • Production costs
  • Consumer behavior and choices
  • Market structures (e.g., perfect competition, monopolies)
• Microeconomics explores how these factors interact to influence market outcomes.
• A table depicting aspects of microeconomics is given within the text.

This quiz explores the fundamentals of micro and macroeconomics, highlighting their definitions, key differences, and historical development. Learn about the contributions of economists like Ragnar Frisch and Alfred Marshall to the field. Test your understanding of how these two branches of economics interact and influence each other.