The difference between micro and macro

economics

By Pavneet Singh Kohli

Outline

Definition Micro economics

Production Price

Macro economics Three elements Tax

Conclusion

DefinitionWhat is Micro and Macro economics?

Microeconomics

Microeconomics is one of the main fields of the social science of economics. It considers the behavior of individual consumers, firms, and industries

Macroeconomics

Macroeconomics is the economics sub-field of study that considers aggregate behavior, and the study of the sum of individual economic decisions.

Micro Economics

Micro Economics - production

Do you think the production of cookies is 250 pieces?

Imagine: You are a owner of a cookie shop.

Busy!

I want to hire new workers.

50

Same skill

50 50 50 50

Micro Economics - productionThe Answer is NO.

0

50

100

150

200

250

300

1 2 3 4 5

Quantity ofOutput(Cookies)Not true

Number of Workers

Figure1: Production of Cookies

N.GREGORY MANKIW, ECONOMICS

Micro Economics - production

Why?

Too crowded Not enough

space Not enough

facilities

Space and facilities

are limited

Cookie Shop

Micro Economics - production

0

50

100

150

200

250

300

1 2 3 4 5

Quantity ofOutput(Cookies)Not true

Number of Workers

Figure1: Production of Cookies

Marginal : an additional unit

The amount of productionincreased. However, the increase of production is gradually getting smaller.

The theory of diminishing marginal product of Labor

Micro Economics - Price

Why Japanese hair-dresser in Sydney is so expensive?

$10-18 $50

Local hair-dresser Japanese hair-dresser

Micro Economics - Price

Japanese people prefer Japanese hair-style. To explain about hair style in English is

difficult.

Not so many Japanese hair-dresser in Sydney.

High demand

Low Supply

Reasons

Micro Economics - Price

High Demand & Low Supply

Supply’

Q1

Demand

Supply

Quantity

Pric

e

O Q

P

P1

P2

Q2

Demand’

Macro Economics

Macro economics - GDP

GDP (Gross Domestic Products)

Government

Consumption Industry

Economics consists of these three elements

What is the relationship among these three elements?

=C+I+G

Macro economics - Consumption

Consumption

Salary

Foods & Daily Products

House & Car

Service

Child care

Macro economics - Industry

Industry

Sales

Buildings& Factories

Pay Salary

instruments

Macro economics - Government

Government

Tax

Social infrastructure Education

Social WelfarePolice &Military

Macro economics - relationship

These three elements have a relationship.

Government

Consumption IndustryBuy

Products

PaySalary

PayTAXGovernm

ent

ExpenseProv

ide

Serv

ice

Pay

TAX

Money

Macro economics - Tax

Government

When a government decides to increase the corporate tax, What will happen?

Consumption IndustryDecrease

Profit

Increaserevenue

TAX

SalaryDecreaseincome

Decreaserevenue

Decrease

Increase

TAX

Conclusion

The difference between Micro and Macro economics is considering economics with individual behavior or sum of individual behavior.

G

C I

Macro economicsMicro economics

Cookie Shop

TAX

Discussion

What are economical problems of communism?