Economics and sociology

T. VIJAY WILLIAM
17041AA107
SECTION -C
WHAT IS ECONOMICS:
NOTE: MICRO ECONOMICS

● Microeconomics studies the decisions of individuals and firms to allocate

resources of production, exchange, and consumption.
● Microeconomics deals with prices and production in single markets and the
interaction between different markets but leaves the study of economy-wide
aggregates to macroeconomics.
● Microeconomists formulate mathematical models based on samples of behavior
and test the models against real-world observations.
EXAMPLE :

microeconomics deals with the economic problem at an individual and business levels: a resource
allocation problem.

Examples:

Consumer buying behaviour of mobile phones (i.e., what makes consumers prefer apple over
others).

Business decisions to introduce a new mobile phone (i.e., what resources will be required to
produce the product).

Business decisions about the cost of producing this mobile phone (i.e., what types of costs will be
incurred)

Business decisions about pricing a product (i.e., which market structure does the business face).
MACRO ECONOMICS: NEED

It was earlier considered that concepts of microeconomics are sufficient enough to

explain economic behaviours. But then it was observed that economic aspects differed
when applied to two different scales. The concepts of microeconomics were not able to
explain various phenomenon taking place at the highest level of aggregation. In
addition to this, there emerged various paradoxes that microeconomics wasn’t able to
explain.
NOTE: MACRO ECONOMICS

● Macroeconomics is the branch of economics that deals with the structure,

performance, behavior, and decision-making of the whole, or aggregate,
economy.
● The two main areas of macroeconomic research are long-term economic growth
and shorter-term business cycles.
● Macroeconomics in its modern form is often defined as starting with John
Maynard Keynes and his theories about market behavior and governmental
policies in the 1930s; several schools of thought have developed since.
● In contrast to macroeconomics, microeconomics is more focused on the
influences on and choices made by individual actors in the economy (people,
companies, industries, etc.).
EXAMPLE - MACROECONOMICS:
● Inflation rate
● Supply of money
● Aggregate demand
● Foreign exchange rate

● EU Economic Crisis. You have loads of information regarding the different gov't
policies that are being implemented such as austerity measures to help boost up the
economy
● The recent decision of the ECB to keep the rate of interest stable
- THANKYOU -