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Transcript of Exposé Marcro-Micro.pdf
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Economic System
Macro and Micro Economics
Establishment : ISTA Roches Noires
Trainer : Sir Achraf Tribak
Presented by : El Mehdi Lakrouni
Adil Ktite
Sabra Nadfaoui
Group : TSC 04
Session : 2012/2013
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Summary
Introduction………………………………………………………………………3
Economic
System………………………………………………………………………………..4
Macro
economics……………………………………………………………………….…5
Micro
Economics……………………………………………………………………….…6
Difference Between Microeconomics and
Macroeconomics……………………………………………………………
..7
Similarities between Microeconomics and
Macroeconomics….......................................................................8
Supply andDemand……………………………………………………………………………..9
Government Intervention in the
Economy………………………………………………………………………….10
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Introduction Economics is concerned with the optimal distribution of
scarce resources within society. For example, economics is
concerned with how individual decisions like how firms
produce goods and which goods people buy. An important
element in economics is concerned with the extent to which
governments can intervene in the economy to improve
economic welfare. Economics is also concerned with wider
issues such as economic growth and unemployment – issues
that affect the whole of society.
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Economic System:
An economic system is a structure of the functioning of an
economy. The structure basically shows the freedom orrestrictions imposed on the people living in the country in
relation to use of resources of the country for the purpose of
economic growth and economic objectives of the country.
Broadly, there are three types of economic systems namely,
Capitalism, Socialism and Mixed Economy.
Of the present-day economic systems, capitalism is perhaps
the oldest. Though it has come under heavy criticism in the
recent past, it still retains its existence in one of the most
prosperous and powerful countries in the world, USA.,
besides several other smaller countries
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Macro economics:
Macro Economics may be defined as that branch of economic
analysis which studies the behaviour of not one particular
unit, but of all the units combined together. Macroeconomicsis a study of aggregates. It is the study of the economic
system as a whole total production, total consumption, total
savings and total investment. The following are the fields
covered by macroeconomics:
Theory of Income, Output and Employment with its two
constituents, namely, the theory of consumptionfunction, the theory of investment function and the
theory of business cycles or economic fluctuations.
Theory of Prices with its constituents of the theories of
inflation, deflation and reflation.
Theory of Economic Growth dealing with the long-run
growth of income, output and employment.
Macro Theory of Distribution dealing with the relativeshares of wages and profits in the total national income.
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Micro Economics:
Microeconomics may be defined as that branch of economic
analysis, which studies the economic behaviour of the
individual unit, maybe a person, a particular household, or a
particular firm. It is a study of one particular unit rather than
all the units combined together. In microeconomics, we study
the various units of the economy, how they function and how
they reach their equilibrium. An important tool used in that
of microeconomics is that of Marginal Analysis. In fact, it is an
indispensable tool used in microeconomics. Some of the
important laws and principles of microeconomics have beenderived directly from marginal analysis. The following are the
fields covered by microeconomics:
Theory of Product pricing with its two constituents,
namely, the theory of consumer behaviour and the
theory of production and costs.
Theory of Factor pricing.
Theory of Economic Welfare.
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Difference Between Microeconomics and
Macroeconomics
Microeconomics is the study of particular markets, and
segments of the economy. It looks at issues such as consumer
behaviour, individual labour markets, and the theory of firms.
Macro economics is the study of the whole economy. It looks
at ‘aggregate’ variables, such as aggregate demand, national
output and inflation.
Micro economics is concerned with:
Supply and demand in individual markets
Individual consumer behaviour.
Individual labour markets
Externalities arising from production and consumption.
Macro economics is concerned with:
Monetary / fiscal policy. e.g. what effect does interest rateshave on whole economy?
Reasons for inflation, and unemployment
Economic Growth
International trade and globalisation
Reasons for differences in living standards and economic
growth between countries.
Government borrowing
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Similarities between Microeconomics and
Macroeconomics:
Although it is convenient to split up economics into two
branches – microeconomics and macroeconomics, it is tosome extent an artificial divide.
1. Micro principles used in macro economics. If you study
impact of devaluation, you are likely to use same economic
principles, such as the elasticity of demand to changes in
price.
2. Micro effects macro economics and vice versa. If we see a risein oil prices, this will have a significant impact on cost-push
inflation. If technology reduces costs, this enables faster
economic growth.
3. Blurring of distinction. If house prices rise, this is a micro
economic effect for housing market. But, housing market is so
influential that it could also be considered a macro-economic
variable, and will influence monetary policy.4. There have been efforts to use computer models of
household behaviour to predict impact on macro economy.
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Supply and Demand:
The most basic model in economics concerns how the price
and quantity of goods and services is determined. For
example, if demand for a good rose, we observe that thisusually leads to a higher price. This higher price in turn
encourages firms to supply more. This simple model helps
explain a whole variety of different issues and topics. For
example, we can use supply and demand to explain wage
differentials. A lawyer can command a high wage because the
number of qualified lawyers is very low. Cleaners tend to get
lower wages because there are many more people withnecessary qualifications.
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Government Intervention in the Economy:
A continual debate in economics is the extent to which
governments intervene in the economy. On the one hand,
free market economists argue government interventionshould be very limited (e.g. to protection of private property,
national defence). The argument of free market economics is
that governments tend to be inefficient, they don’t have the
same incentives to produce what people want and need. If
you leave it to markets, the ‘invisible hand’ automatically
responds to changes in demand to provide goods that people
want.
On the other hand, other economists argue that the free
market actually creates many problems. In a free market we
may have monopolies, inequality, under-provision of
important public services. Therefore to improve economic
welfare, there is a necessity for governments to raise tax and
spend on public goods not provided by the free market.