2017-11-30
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Microeconomics. The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units—that is, firms and households.
Macroeconomics. The branch of economics that examines the economic behavior of aggregates—income, employment, output, and so on—on a national scale.
Microeconomics looks at the individual unit—the household, the firm, the industry. It sees and examines the “trees.” Macroeconomics looks at the whole, the aggregate. It sees and analyzes the “forest.”
| TABLE 1.1 Examples of Microeconomic and Macroeconomic Concerns | ||||
| Divisions of Economics | Production | Prices | Income | Employment |
| Microeconomics | Production/output in individual industries and businesses How much steel How much office space How many cars | Price of individual goods and services Price of medical care Price of gasoline Food prices Apartment rents | Distribution of income and wealth Wages in the auto industry Minimum wage Executive salaries Poverty | Employment by individual businesses and industries Jobs in the steel industry Number of employees in a firm Number of accountants |
| Macroeconomics | National production/output Total industrial output Gross domestic product Growth of output | Aggregate price level Consumer prices Producer prices Rate of inflation | National income Total wages and salaries Total corporate profits | Employment and unemployment in the economy Total number of jobs Unemployment rate |
| TABLE 1.2 The Fields of Economics | |
| Behavioral economics | uses psychological theories relating to emotions and social context to help understand economic decision making and policy. Much of the work in behavioral economics focuses on the biases that individuals have that affects the decisions they make. |
| Comparative economic systems | examines the ways alternative economic systems function. What are the advantages and disadvantages of different systems? |
| Econometrics | applies statistical techniques and data to economic problems in an effort to test hypotheses and theories. Most schools require economics majors to take at least one course in statistics or econometrics. |
| Economic development | focuses on the problems of low-income countries. What can be done to promote development in these nations? Important concerns of development for economists include population growth and control, provision for basic needs, and strategies for international trade. |
| Economic history | traces the development of the modern economy. What economic and political events and scientific advances caused the Industrial Revolution? What explains the tremendous growth and progress of post-World War II Japan? What caused the Great Depression of the 1930s? |
| Environmental economics | studies the potential failure of the market system to account fully for the impacts of production and consumption on the environment and on natural resource depletion. Have alternative public policies and new economic institutions been effective in correcting these potential failures? |
| Finance | examines the ways in which households and firms actually pay for, or finance, their purchases. It involves the study of capital markets (including the stock and bond markets), futures and options, capital budgeting, and asset valuation. |
| Health economics | analyzes the health care system and its players: government, insurers, health care providers, and patients. It provides insight into the demand for medical care, health insurance markets, cost-controlling insurance plans (HMOs, PPOs, IPAs), government health care programs (Medicare and Medicaid), variations in medical practice, medical malpractice, competition versus regulation, and national health care reform. |
| The history of economic thought, | which is grounded in philosophy, studies the development of economic ideas and theories over time, from Adam Smith in the eighteenth century to the works of economists such as Thomas Malthus, Karl Marx, and John Maynard Keynes. Because economic theory is constantly developing and changing, studying the history of ideas helps give meaning to modern theory and puts it in perspective. |
| Industrial organization | looks carefully at the structure and performance of industries and firms within an economy. How do businesses compete? Who gains and who loses? |
| International economics | studies trade flows among countries and international financial institutions. What are the advantages and disadvantages for a country that allows its citizens to buy and sell freely in world markets? Why is the dollar strong or weak? |
| Labor economics | deals with the factors that determine wage rates, employment, and unemployment. How do people decide whether to work, how much to work, and at what kind of job? How have the roles of unions and management changed in recent years? |
| Law and economics | analyzes the economic function of legal rules and institutions. How does the law change the behavior of individuals and businesses? Do different liability rules make accidents and injuries more or less likely? What are the economic costs of crime? |
| Public economics | examines the role of government in the economy. What are the economic functions of government, and what should they be? How should the government finance the services that it provides? What kinds of government programs should confront the problems of poverty, unemployment, and pollution? What problems does government involvement create? |
| Urban and regional economics | studies the spatial arrangement of economic activity. Why do we have cities? Why are manufacturing firms locating farther and farther from the center of urban areas? |
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While many transactions happen in anonymous markets in which buyers and sellers don’t know one another, there are many other occasions in which markets operate more effectively if individuals develop some trust in one another.
In experiments run at the University of Wisconsin and the University of Miami, researchers conclude, “We find that men trust more than women, and women are more trustworthy than men.”
