Chapter 5 — Microeconomics and Macroeconomics.

1. The Difference between Microeconomics and Macroeconomics.

a) Microeconomics.
- study of the behavior and decisions of households and firms, and the performance of
individual markets
- includes the changes in the earnings in a particular occupation, changes in the output in
the car industry...
- small scale.

b) Macroeconomics.
- study of the whole economy
- includes the changes in the number of people employed in the economy, changes in
country’s output...
- large scale.

c) The Connection between Microeconomics and Macroeconomics.

- similar concepts, different scales
- microeconomics decisions and interactions add up to the macroeconomic picture
- changes in micros affect macros
- i.e. reduction in output of car industry = rise in a country’s unemployment rate
- i.e. governments cut income tax rates = households buy more cars.

2. Decision Makers in microeconomics and macroeconomics.

- economic agents = those who undertake economic activities and make economic
decisions
- households, firms and government
- households = buyers, consumers, savers, workers
- firms = business concerns that produce goods and services, employ workers and other
FOPs
- government = system which rules a country or region, produces and provides some
products, provides financial benefits, and taxes, and regulates the private sector
—————————————
• aims:
- households = low prices + good quality as consumers, good working conditions + high
pays as workers, money to be safe + good return as savers
- firms = make as much profit as possible
- government = strong economy + full employment of labour, may want to improve the
performance of individual markets.

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