THREE TOPICS OF SHORT REPORTs

ANDREA FARINA will speak about:

• Microeconomics

• Macroeconomics

• Positive Statements

Two subfields of economics study

Because of its complexity, to understand the various economic processes, Economics is divided

in two different sectors:

• MICROECONOMICS• MACROECONOMICS

These two fields study DIFFERENT MATTERS and so they often have DIFFERENT APPROACHES.

THE DEfinition of MICROECONOMICS

This subfield studies:

• the firm’s or household’s INDIVIDUAL DECISION to allocate their limited resources

• their INTERACTION in the market

This study sector comes out from the conception of Economy as the management and the allocation of limited resources, such as in a family. So every

person could potentially INFLUENCE ECONOMY with his individual choises.

The application of microeconomics

The typical application of microeconomics is in the market of goods and services.

Its aim is to EXAMINE HOW INDIVIDUAL BEHAVIOURS INFLUENCE DEMAND AND SUPPLY.

From this analysis, we can study the DETERMINATION OF PRICES and so the

QUANTITIES SUPPLIED AND DEMANDED.

AN EXAMPLE OF MICROECONOMICS APPLICATION

An example of microeconomics study could be the rent control on housing in New York city, or the effects of compulsory school attendance

on workers’ earnings.

CONCLUSION: We can see that this way of analysis is strictly linked to little economic processes, which

can regard even a few people.

THE DEFINITION OD MACROECONOMICS

This subfield studies:

• the ECONOMY-WIDE PHENOMENA

This study sector deals with the economy as a WHOLE: it is the SUM OF THE ACTIVITIES OF ALL THE DECISION-MAKERS, like firms or households.

In this way, we can see how Macroeconomics is strictly LINKED and INFLUENCED by

Microeconomics: the economy-wide phenomena depend on the individual choise of each person.

The application of macroeconomics

With some typical indicators, such as G.D.P., Macroeconomics is applied to UNDERSTAND THE

WHOLE ECONOMY FUNCTIONS.

Its models aim to EXPLAIN THE LINK OF SOME FACTORS WITH THE INTERNATIONAL FINANCE.

An example of macroeconomics application

An example of Macroeconomics study could be the effects of borrowing by federal government or the alternative policies to raise growth in

national living standards.

CONCLUSION: We can see that this way of analysis is strictly linked to big economic processes, which

often regard millions of people, considered as one.

THE DEFINITION OF POSITIVE STATEMENTS

To examine economic world, we can use two differents techniques:

• POSITIVE STATEMENTS: typical of scientists, its aim is to DESCRIBE REALITY AS IT REALLY IS (descriptive way)

• NORMATIVE STATEMENTS: typical of policy, its aim is to PRESCRIBE HOW WORLD SHOULD WORKS (prescriptive way)

The application of positive statements

Even if positive statements don’t aim to change the world, they have a FUNDAMENTAL ROLE: they help

us to CLARIFY THE REALITY and to STUDY ITS BEHAVIOURS.

So trying to change the world needs not only positive statements because you can also consider, for

example, ethics or philosophy. You need POSITIVE STATEMENTS + VALUE JUDGMENTS in order to

obtain normative statements.

EXAMPLES OF POSITIVE STATEMENTS

Examples of POSITIVE statements could be the following sentences:

• Minimum-wage laws cause unemployment.(NORMATIVE: The government should raise the

minimum wage.)

• The price of milk has risen from $3 gallon to 5$ gallon in the five past years.

(NORMATIVE: The government sould control the increase of milk prices.)

The End