NAME: Muhammad Tahseen

ROLL NO: 1048-BH-ECON-20

Exam: Economics
SUBMITTED TO: MA’AM Alvina
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Q1:write a short essay on how microeconomics differs from

macroeconomics? explain………...economics?
Ans: The main difference between microeconomics and macroeconomics is
scale. Microeconomics is basically based on one or individual firms and
households; it has limited resources to make decisions on the allocation as
households and firms make their decisions and how they interact in markets.
On the other side macroeconomics study economics as a whole
microeconomics is related with specific firms and industries. We can also say
that microeconomics is the study of markets while macroeconomics is the
study of economics on the national, regional, or global scale.
It also includes wide phenomena, unemployment and economic growth.
Microeconomics & macroeconomics are closely intertwined. Because changes
in the overall economy arise from the decisions of millions of individuals, it is
impossible to understand macroeconomic developments without considering
the associated microeconomics decisions. For example of microeconomics:
GE’s pricing policy
Macroeconomics example: inflation in monaco.Economics is concerned with
the well-being of all people, including those with jobs and those without jobs,
as well as those with high incomes and those with low incomes. Economics
acknowledges that production of useful goods and services can create
problems of environmental pollution. It explores the question of how investing
in education helps to develop workers’ skills. It probes questions like how to
tell when big businesses or big labor unions are operating in a way that
benefits society as a whole and when they are operating in a way that benefits
their owners or members at the expense of others. It looks at how government
spending, taxes, and regulations affect decisions about production and
consumption.It should be clear by now that economics covers a lot of ground.
That ground can be divided into two parts: Microeconomics focuses on the
actions of individual agents within the economy, like households, workers, and
businesses; Macroeconomics looks at the economy as a whole. It focuses on
broad issues such as growth of production, the number of unemployed people,
the inflationary increase in prices, government deficits, and levels of exports
and imports. Microeconomics and macroeconomics are not separate subjects,
but rather complementary perspectives on the overall subject of the
economy.To understand why both microeconomic and macroeconomic
perspectives are useful, consider the problem of studying a biological
ecosystem like a lake. One person who sets out to study the lake might focus
on specific topics: certain kinds of algae or plant life; the characteristics of
particular fish or snails; or the trees surrounding the lake. Another person
might take an overall view and instead consider the entire ecosystem of the
lake from top to bottom; what eats what, how the system stays in a rough
balance, and what environmental stresses affect this balance. Both approaches
are useful, and both examine the same lake, but the viewpoints are different.
In a similar way, both microeconomics and macroeconomics study the same
economy, but each has a different viewpoint.Whether you are looking at lakes
or economics, the micro and the macro insights should blend with each other.
In studying a lake, the micro insights about particular plants and animals help
to understand the overall food chain, while the macro insights about the
overall food chain help to explain the environment in which individual plants
and animals live.In economics, the micro decisions of individual businesses are
influenced by whether the macroeconomy is healthy; for example, firms will be
more likely to hire workers if the overall economy is growing. In turn, the
performance of the macroeconomy ultimately depends on the microeconomic
decisions made by individual households and businesses.
Q.2 Write a detailed note on the importance of GDP. What are the different
methods of calculating GDP? Explain the methods that you have studied in
class. Are there any limitations to GDP as measure of economic progress?
Ans: GDP is the total value of goods and services generated within a country's
geographic borders over a given time span, usually a year. The GDP growth
rate is a key indicator of a country's economic success.
There are 3 methods to measure gdp
1:product method
2:income methode(not studied yet)
3:expandeture method
product method: The product method is almost the opposite of the
expenditure method. The development method calculates the overall value of
economic output and subtracts the cost of intermediate products purchased in
the process, rather than calculating the input costs that contribute to
economic operation (like those of materials and services). The investment
approach looks forward from prices, while the development approach looks
backward from a state of completed economic operation.
expandeture method: The expenditure method is a method of estimating GDP
that takes into account consumption, investment, government spending, and
net exports. It is the most common method of calculating GDP. It states that all
the private sector, including customers and businesses, as well as the
government spends within a country's borders must add up to the total value
of all finished goods and services generated over a given time span. This
approach yields nominal GDP, which must be modified for inflation to yield
actual GDP.
For estimated GDP, the expenditure method can be contrasted with the
income approach.
The limitations of GDP: GDP is the most widely used measure of well-being
and is a valuable predictor of a country's economic success. It does, however,
have some major disadvantages, including:
Non-market transactions are excluded.
Failure to account for or reflect the level of income inequality in society.
Failure to show whether or not the country's growth rate is sustainable
Failure to account for the costs of negative externalities levied on human
health and the environment as a result of the nation's output production or
consumption.
Treating the replacement of depreciated capital in the same way as new
capital development.
Different national and international organisations have developed alternative
indices that provide a more comprehensive picture of a country's quality of
life. There are some of them:
The Human Development Index is a test of how much people have progresse
The Genuine Progress Indicator is a metric that measures how much
The Index of a Happy Planet
Each of these indices is a composite measure that takes into account both
income and non-income factors including life expectancy, literacy rates,
environmental indicators, inequality measures, and so on. They have a
measure of life quality that goes beyond the narrowness of a country's GDP
value by using these variables.
Q3: Write an essay on the different types of market structure. Also provide
some real examples with justification?
Ans: Market Structure is one of the significant components to see how the
market will work, decide the conduct of firms on the lookout and the result
that will be delivered by the market. In financial matters term, market
structure is the number, size, kind and appropriation of purchasers and
dealers. As indicated by Porter (1985), another apparatus to dissect an
organization’s market structure, which incorporates the bartering force of
purchasers, dealing force of providers, danger of new contenders’ going into
the market, danger of substitutes and power of rivalry. Four kinds of market
types or constructions are wonderful rivalry, syndication, oligopoly and
monopolistic rivalry. Monopolistic rivalry is a combination of amazing rivalry
and restraining infrastructure, since they share a portion of the highlights of
each. Serious business sectors give successful outcomes, syndication markets
show hazard misfortunes. Monopolistic rivalry is some place in the middle, not
as proficient as unadulterated rivalry but rather less dangerous misfortune
than a syndication. In a monopolistic rivalry market has three crucial trademark
which is; numerous purchasers and dealers, vendors offer a separated item
and merchants can undoubtedly enter or leave the market. In monopolistic
rivalry there are numerous organizations in the market yet not as numerous as
in the amazing rivalry market. In amazing rivalry, the current of numerous
purchasers and merchants impact the market cost yet in monopolistic rivalry
dealers can’t impact the market cost. Monopolistic firms face non-value rivalry
and firms have some ability to control their own creation cost. This is on the
grounds that merchandise that are created can be separated from each other.
In this manner, despite the fact that organizations raise the value, there are
still clients who will buy the merchandise they produce. Then again, if firms
decrease the cost, deals can be expanded yet won’t draw in every one of the
clients from contenders. Monopolistic firms have the opportunity to enter and
leave the business without any problem. This is on the grounds that new firms
can create various sorts of products. Typically new firms prevail with regards to
entering a monopolistic market by creating products that are higher caliber,
they run advancements and furthermore promote. The PC business in Malaysia
can be supposed to be in the monopolistic rivalry market. There are numerous
brands in the market like Compaq, Acer, Apple, DELL, Toshiba, etc. Finally is
Oligopoly market. Oligopoly is a market where there are a couple of vendors
and purchasers and firms which impact each other. These business sectors are
not syndicated on the grounds that there is more than one merchant, however
there likewise not a monopolistic contender by the same token. In other
words, there are a couple of firms that rule the market. For instance, in the city
there are a considerable lot of eateries, the present circumstance we called as
the ‘market suppers’ under monopolistic rivalry. In any case, on the off chance
that we characterize it as the ‘Thai eatery in the city’ there might be a couple
of café. Thus, this couple of markets we classify as an oligopoly market. Others
normal for oligopoly are products that they created are the same or practically
the equivalent. So that cost relies upon the participation among the firm. They
have the ability to set excessive costs toward their item. Then again, if firms do
not give the collaboration, the cost in the market will be kept lower and less
steady. There are enormous boundaries to section by new firms to join the
oligopoly. This doesn’t imply that new firms can’t enter the market, however
those organizations will confront troubles, for example, the requirement for
gigantic capital ventures and old firms that as of now have a secure situation
on the lookout. In an oligopoly market, firms are not rivaled by their item cost
yet ordinarily by their promotion. The great promotion will get clients who are
faithful to their item and furthermore can expand their deals. The goal of
making a promotion is to clarify, convince or impact their client about the item
and furthermore can assist with keeping up their relationship. Illustration of
oligopoly in Malaysia is the petroleum industry. They are arranging as an
oligopoly on the grounds that there are not many firms that control the market
like Shell, Petronas, Esso, etc. This firm is contended among them to control
the market. They likewise rely upon one another to choose the selling cost.
EXAMPLE:
For instance, the menu of a drive-thru eatery will rely upon whether it is in
Europe, Asia, Africa, and so forth For organizations that produce and sell items
and administrations that have general interest, worldwide promoting is
essential. Food, cell phones, and vehicles, for instance, have all inclusive
interests.
Q.4 a) Explain the concept of “elasticity” and its various types. Also provide a
detailed account on its relevance/applications in the theory of demand, supply
and market. b) Explain in detail the role of government in regulating the market
prices? Provide some practical cases/or real-world examples to elaborate on
this concept
Ans: The word "elasticity" refers to how buyers and sellers respond to changes in
market conditions.
Elasticity helps one to more precisely evaluate supply and demand.
Demand inelastic
Price shifts have no impact on quantity requested.
The demand elasticity of price is less than one.
Demand elastic
Price adjustments have a major effect on the quantity requested.
The price elasticity of demand reaches one.
Perfectly inelastic
Price changes have no effect on the quantity demanded.
Perfectly elastic
With any change in price, the quantity demanded changes infinitely.
Elastic Unit
The quantity demanded fluctuates at the same rate as the price.