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Four major economic goals are widely accepted in many societies. Microeconomics is useful in achieving a worm’s-eye view of some very specific component of our economic system.ĥ. In microeconomics we examine the trees, not the forest. It gives us a bird’s-eye view of the economy. In short, macroeconomics examines the forest, not the trees. Besides microeconomics tries to understand what factors affect the prices, wages and earnings. Microeconomics also studies how government activities such as regulations and taxes affect individual markets. Here we talk in terms of an individual industry, firm, or household, and concentrate upon such things as the output or price of a specific product, the number of workers employed by a single firm and so forth. Our interest here is in the behavior of the individual economic actors. In microeconomics we focus on the individuals, firms, and government agencies that actually comprise the larger economy. Microeconomics is the branch of economics that is concerned with the details of this «big picture». The essential concern of macroeconomics is to understand and improve the performance of the economy as a whole.
#The goal of an economist who formulates new theories is to full#
In macroeconomics we worry about such national goals as full employment, control of inflation, and economic growth, without worrying about the well-being or behavior of specific individuals or groups. Macroeconomics is the branch of economics that focuses on the behavior of an entire economy - the «big picture». Some economic principles are concerned with macroeconomics, while others connected with microeconomics. The deductive method goes from the general to the particular, from theory to facts. Deduction involves stating a hypothesis and then gathering facts to determine whether the hypothesis is valid. Induction means deriving principles from facts. Stated more formally, economists use both deductive and inductive methods. Economists are as likely to move from theory to facts in studying economic behavior as they are to move from facts to theory. Economic principles are particularly valuable in formulating economic policy designed to solve problems and control undesirable events. The task of economic theory or «economic analysis» is the derivation of these principles. Principles and theories - the end result of economic analysis - bring order and meaning to a number of facts by tying these facts together, putting them in correct relationship to one another, and generalizing upon them.
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The generalizations stated by economists are called «principles», «theories», «laws», or «models». This task is sometimes called descriptive or empirical economics. The economists gather facts which are relevant to a particular problem or specific segment of the economy. What do economists do? They formulate economic principles which are useful in setting policies designed to solve economic problems. We want to know how an economy is organized, how it behaves, and how successfully it achieves its basic objectives. Understanding how various economies work is the basic purpose of studying economics. So, economics is concerned with the efficient use of scarce resources in the production of goods and services to satisfy material wants and the economy means a system for the management, use and control of the money, goods and other resources of a country, community or household. Scarcity is a basic fact of economic life. Resources are scarce relative to our desires. We cannot produce everything we want in the quantities we desire. Unfortunately, the quantity of available resources is limited. And this is done through the organizational mechanism which we call the economic system or economy. Factors of production are used to produce final goods and services which satisfy our material wants. In order to produce anything, we need resources, or factors of production - land, labor, and capital (buildings and machinery). More specifically, economics is the study of the behavior of human beings in producing, distributing and consuming material goods and services. Our striving to improve our material well-being, to «make a living», is the concern of economics. We want, among other things, love, social recognition, and the material necessities and comforts of life. the tasks of empirical economics and economic theory ġ.
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Find an appropriate heading for each paragraph.ĭ. Skim the text about the nature and methodology of economics.