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Macro and Micro Economics. What is the subject matter of economics - Essay Example

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The subject matter of Economics is on explaining the world. That is, ways people behave, way in which most markets work and the way governments work in relation to the administration of scarce resources…
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Macro and Micro Economics. What is the subject matter of economics
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Download file to see previous pages The scope of Economics revolves around many things some of which are factor pricing, product pricing, income, demand, economic growth and welfare. The study of economics attempts to gain a glimmer of light on how and why the wealth of the world gets produced, distributed and finally consumed. It not only examines the local market, but it also everything at the global levels. Class structures and wealth distribution, the role of government and politicians, demand and supply of products and services, division of labor and other countless factors are all encompassed in economics. It attempts to explain the production system in the world and why they function the way they do (ILO, 2013). Arguably, one of the most inalienable factors in the definition of the subject matter of economics is division of labor. According to International Labour Organization, the current distribution of labor is a positive factor contributing to the economic climate today. Labor gets distributed not only between companies and countries but also within a company. Wage disparity occurs between the laborers and capitalists, a condition that results from division of labor. The laborers will thus have low buying powers in comparison to the business owners. This means that their economic standard will always be lower than that of capitalists. Division of labor is thus effective as a clear vision of the subject matter of economics. Economics study is not effective if we fail to discuss the two main divisions of economics namely macroeconomics and microeconomics. Macroeconomics is a branch of economics which looks into, the behavior, decision-making and performance of an economy as a whole and not as individual markets. The World Trade Organization makes use of GDP, unemployment and price indices in a bid to understand how the economy functions. In macro economics, models get used to explain the relationship between such factors like national income, output, consumption, unemployment, savings, inflation and international finance (IMF, 2013). Macro economics is such a broad field of study and there are two main areas of research considered emblematic of the discipline. This is the attempt to give an account of the causes and consequences of short-run fluctuations in the national income (the business cycle) and an attempt to understand the determinants of a long-run economic growth. In most cases, macroeconomic models and their focuses get utilized by governments to assist them in their development and evaluation of economic policies. Some of these policies include the monetary policies, fiscal policies and comparison policy. Further, macroeconomics encompasses output and income, unemployment and inflation & deflation as the three major variables of its research (IMF, 2013). Thus, the subject matter of macroeconomics revolves around the three aspects of national aggregates; stability, growth and stability of the community at large. Most variables of macroeconomics get related with employment, inflation, unemployment issues and import and export matters of a nation or between nations. Microeconomics is the branch of economics that analyzes market behaviors at a level of individual consumers and firm. This it does in the attempt to understand the underlying decision-making processes of firms and households. It majorly concerns itself with the interaction between individual buyers and sellers (IMF, 2013). In particular, macro economics mainly focuses on supply and demand patterns, as well as price and output determination at these individual markets. The strength of microeconomics crops from the simplicity of its underlying structure and its closeness in contact with the ...Download file to see next pagesRead More
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