Microeconomics and macroeconomics are related but separate

approaches to studying the economy. Microeconomics is concerned

with the actions of individuals and businesses, while macroeconomics
is focused on the actions that governments and countries take to
influence broader economies.

Microeconomics is the field of economics that looks at the economic behaviors of individuals,
households, and companies. Macroeconomics takes a wider view and looks at the economies
on a much larger scale—regional, national, continental, or even global.

Macroeconomics vs microeconomics: the overlap

For example, if the government raises the tax on a certain product

(macroeconomics), an individual shop owner will have to increase the price,
which will impact on the consumer and their decision for or against the
product at that price (microeconomics).Oct 18, 2019

Microeconomics vs. Macroeconomics

Because microeconomics focuses on the behavior of small units of the
economy, it tends to limit itself to specific and specialized areas of study. This
includes the balance of supply and demand in individual markets, the
behavior of individual consumers (which is referred to as consumer theory),
workforce demand, and how individual companies determine wages for their
workforces.

Macroeconomics has a much broader reach than microeconomics. Prominent

areas of research in the field of macroeconomics concern the implications of
fiscal policy, locating the reasons for inflation or unemployment, the
implications of government borrowing and economic growth on a nationwide
scale. Macroeconomists also examine globalization and global trading
patterns and perform comparative studies between different countries in
areas such as living standards and economic growth.

While the main difference between the two fields concerns the scale of the
subjects under analysis, there are further differences.
Managerial economics is a branch of economics involving the application of economic methods in
the organizational decision-making process.[1] Economics is the study of the production, distribution,
and consumption of goods and services. Managerial economics involves the use of economic
theories and principles to make decisions regarding the allocation of scarce resources. [2] It guides
managers in making decisions relating to the company's customers, competitors, suppliers, and
internal operations.[3]
Managers use economic frameworks in order to optimize profits, resource allocation and the overall
output of the firm, whilst improving efficiency and minimising unproductive activities. [4] These
frameworks assist organisations to make rational, progressive decisions, by analysing practical
problems at both micro and macroeconomic levels.[5] Managerial decisions involve forecasting
(making decisions about the future), which involve levels of risk and uncertainty. However, the
assistance of managerial economic techniques aid in informing managers in these decisions. [6]
Managerial economists define managerial economics in several ways: 1. It is the application of
economic theory and methodology in business management practice.
2. Focus on business efficiency.
3. Defined as "combining economic theory with business practice to facilitate management's
decision-making and forward-looking planning."
4. Includes the use of an economic mindset to analyze business situations.
5. Described as "a fundamental discipline aimed at understanding and analyzing business decision
problems".
6. Is the study of the allocation of available resources by enterprises of other management units in
the activities of that unit.
7. Deal almost exclusively with those business situations that can be quantified and handled, or at
least quantitatively approximated, in a model. [3]
The two main purposes of managerial economics are:

1. To optimize decision making when the firm is faced with problems or obstacles, with
the consideration and application of macro and microeconomic theories and
principles.[7]
2. To analyze the possible effects and implications of both short and long-term
planning decisions on the revenue and profitability of the business.
The core principles that managerial economist use to achieve the above purposes are:

 monitoring operations management and performance,

 target or goal setting
 talent management and development.
In order to optimize economic decisions, the use of operations research, mathematical
programming, strategic decision making, game theory[8] and other computational methods[9] are often
involved. The methods listed above are typically used for making quantitate decisions by data
analysis techniques.
The theory of Managerial Economics includes a focus on; incentives, business
organization, biases, advertising, innovation, uncertainty, pricing, analytics, and competition.[10] In
other words, managerial economics is a combination of economics and managerial theory. It helps
the manager in decision-making and acts as a link between practice and theory.[11] Furthermore,
managerial economics provides the tools and techniques that allow managers to make the optimal
decisions for any scenario.
Some examples of the types of problems that the tools provided by managerial economics can
answer are:

 The price and quantity of a good or service that a business should produce.
 Whether to invest in training current staff or to look into the market.
 When to purchase or retire fleet equipment.
 Decisions regarding understanding the competition between two firms based on the
motive of profit maximization.[12]
 The impacts of consumer and competitor incentives on business decisions[13]
Managerial economics is sometimes referred to as business economics and is a branch
of economics that applies microeconomic analysis to decision methods of businesses or other
management units to assist managers to make a wide array of multifaceted decisions. The
calculation and quantitative analysis draws heavily from techniques such as regression
analysis, correlation and calculus.[14]

Businesses run on various theories that are explained in Economics. Managerial

Economics is the stream of management studies that emphasizes solving problems
in businesses using the theories in micro and macroeconomics. This branch of
economics is used by firms to not only find a solution to problems in daily running but
also for long-term planning. We can also say that Managerial economics is a practical
application of theories in economics.

“Managerial economics is concerned with the application of economic

concepts and economic analysis to the problems of formulating rational
managerial decisions.”
- Edwin Mansfield, Economics Professor, University of Pennsylvania

Instead, Smith proposed that the wealth of a nation consisted of both

farm output and manufactured goods along with the labor it took to
produce them. To increase its wealth, Smith argued, a nation needed
to expand its economic production.
Smith's explanation of economic growth, although not neatly assembled in
one part of The Wealth of Nations, is quite clear. The core of it lies in his
emphasis on the division of labour (itself an outgrowth of the “natural”
propensity to trade) as the source of society's capacity to increase its
productivity.Aug 24, 2023

The Wealth of Nations is a profoundly influential work in the study of economics and examines
exactly how nations become wealthy. Adam Smith advocates that by allowing individuals to
freely pursue their own self-interest in a free market, without government regulation, nations will
prosper.

The Wealth of Nations

Eamonn Butler's Condensed Wealth of Nations is
available to download here .
The book's broad themes
The first theme in The Wealth of Nations is that regulations on commerce are
ill-founded and counter-productive. The prevailing view was that gold and
silver was wealth, and that countries should boost exports and resist imports in
order to maximize this metal wealth. Smith’s radical insight was that a nation’s
wealth is really the stream of goods and services that it creates. Today, we
would call it gross national product. And the way to maximise it, he argued, was
not to restrict the nation’s productive capacity, but to set it free.

Another central theme is that this productive capacity rests on the division of
labour and the accumulation of capital that it makes possible. Huge efficiencies
can be gained by breaking production down into many small tasks, each
undertaken by specialist hands. This leaves producers with a surplus that they
can exchange with others, or use to invest in new and even more efficient
labour-saving machinery.

Smith’s third theme is that a country’s future income depends upon this capital
accumulation. The more that is invested in better productive processes, the more
wealth will be created in the future. But if people are going to build up their
capital, they must be confident that it will be secure from theft. The countries
that prosper are those that grow their capital, manage it well, and protect it.

A fourth theme is that this system is automatic. Where things are scarce, people
are prepared to pay more for them: there is more profit in supplying them, so
producers invest more capital to produce them. Where there is a glut, prices and
profits are low, producers switch their capital and enterprise elsewhere. Industry
thus remains focused on the nation’s most important needs, without the need for
central direction.

But the system is automatic only when there is free trade and competition.
When governments grant subsidies or monopolies to favoured producers, or
shelter them behind tariff walls, they can charge higher prices. The poor suffer
most from this, facing higher costs for the necessities that they rely on.

A further theme of The Wealth Of Nations is that competition and free

exchange are under threat from the monopolies, tax preferences, controls, and
other privileges that producers extract from the government authorities.

For all these reasons, Smith believes that government itself must be limited. Its
core functions are maintaining defence, keeping order, building infrastructure
and promoting education. It should keep the market economy open and free, and
not act in ways that distort it.

Production and exchange

The Wealth Of Nations begins with Smith explaining production and exchange,
and their contribution to national income. Using the example of a pin factory,
Smith shows how specialisation can boost human productivity enormously. By
specialising, people can use their talents, or acquire skill. And they can employ
labour-saving machinery to boost production. Then they exchange those
specialist products, spreading the benefits of specialisation across the whole
population.

How far and how fast the benefit spreads depends on how wide and efficient is
the market. Often, employers try to rig markets in their own interests, and call
on governments to help them. But the best interests of ordinary people are
served if policymakers avoid such interventions and promote open competition.
The accumulation of capital
Smith goes on to say that building up capital is an essential condition for
economic progress. By saving some of what we produce instead of immediately
consuming it, we can invest in new, dedicated, labour-saving equipment. The
more we invest, the more efficient our production becomes. It is a virtuous
circle.

Thanks to this growth of capital, prosperity becomes an expanding pie:

everyone becomes richer. But capital can be lost, through mistakes, or theft, or
profligate government spending. Governments should aim to allow people to
build up capital in the confidence that they will enjoy its fruits, and should be
aware that their own taxation and spending will eat into the nation’s productive
capital.

Economic policy
Just as individuals gain from specialisation, says Smith, so do nations. There is
no point trying to grow grapes in Scotland, when they grow so plentifully in
France. Countries should do what they are best at, and trade their products.
Restrictions on international trade inevitably make both sides poorer.
Legislators think too much of themselves when they believe that by intervening,
they can direct production better than the market can.

The role of government

Smith is critical of government and officialdom, but is no champion of laissez-
faire. He believes that the market economy he has described can function and
deliver its benefits only when its rules are observed – when property is secure
and contracts are honoured. The maintenance of justice and the rule of law is
therefore vital.

So is defence. If our property can be stolen by a foreign power, we are no better

off than if our own neighbours steal it. And Smith sees a role for education and
public works too, insofar as these collective projects make it easier for trade and
markets to operate.

Where tax has to be raised for these purposes, it should be raised in proportion
to people’s ability to pay, it should be at set rates rather than arbitrary, it should
be easy to pay, and it should aim to have minimal side effects. Governments
should avoid taxing capital, which is essential to the nation’s productivity. Since
most of their spending is for current consumption, they should also avoid
building up large debts, with draw capital away from future production.

The Wealth of Nations today

Smith’s world was very different to ours, of course, before the Industrial
Revolution changed everything. At yet, by showing how the freedom and
security to work, trade, save and invest promotes our prosperity, without the
need for a directing authority, The Wealth Of Nations still leaves us with a
powerful set of solutions to the worst economic problems that the world can
throw at us. The free economy is an adaptable and flexible system, which can
withstand the shock of the new, and cope with whatever the future brings.

The Wealth of Nations Summary

The Wealth of Nations is known today as a cornerstone of capitalism. Popularizing the
terms laissez-faire and invisible hand, Adam Smith argues for an economic system with little
unnecessary government interference that allows people to serve their self-interests. During
Smith's time, the prevailing economic system was that of mercantilism. During this time,
precious metals were deemed the measure of a country's value. For example, European
countries were colonizing the globe in an effort to find more gold and silver. However, Smith
argues that a nation's real value is what its people can produce in the terms of goods and
services. (This is the equivalent of today's gross domestic product.)

Furthermore, he argues that to increase the production of goods and services, a society must
be efficient and those best at creating a particular should be the only ones creating that good.
This division of labor is a driving theme throughout his work. This division leads to efficiency,
and this efficiency leads to an increase in productivity which leads to an increase in wealth.

Behind these efficiencies and productivity is a driving force that Smith described as an invisible
hand. He argues that members of a society will do what is in their best interest and that it is in
their best long-term interest to create an efficient and moral society. However, this only works if
the system allows free trade and competition. Government interference must be limited to
defense, maintaining order, infrastructure, and education. This free market is the basis of
present-day capitalism.
Division of Labor in The Wealth of Nations
One of the primary themes discussed by Smith is the division of labor. Smith argues that
the division of labor and specialization creates more efficiency. He uses the example of making
a pin. According to Smith, even the most accomplished pin maker is better at a certain part of
the process than other parts. This should be the part that he or she focuses on, whether that is
the head, the shaft, or joining the two parts. This allows others involved in the process to
specialize and focus on just one aspect as well. By doing what each individual is best at, the
process is sped up and quality improves. In Smith's example, one person makes the head of the
pin, one makes the shaft, and then a third person joins the two parts. Just as this division of
labor helps the pin makers make more pins, this same idea of the division of labor, when
applied to an economic system at large, creates a more productive society.

Productivity in The Wealth of Nations

This productivity is another primary theme within The Wealth of Nations. By using the division of
labor to increase the output from the same number of inputs, productivity is increased. This
productivity happens because specialization means that skill increases without demanding
more labor. Smith's The Wealth of Nations was published on the cusp of the Industrial
Revolution, and his theories of efficiencies and productivity became the mantra of factory
managers and business owners across Europe and even in the young United States of America.
The Industrial Revolution was the manufacturing boom in Great Britain and across the world
from the mid-18th century to the mid-19th century. Manufacturers were looking to create more
for less, and Smith's ideas inspired much of the push behind this productivity. Factories and
large manufacturing centers needed to measure productivity and constantly increase their
output in order to stay competitive in this new economy.

Inflation is the rate of increase in prices over a given period of time.

Inflation is typically a broad measure, such as the overall increase in
prices or the increase in the cost of living in a country.

More jobs and higher wages increase household incomes and lead to a rise in consumer
spending, further increasing aggregate demand and the scope for firms to increase the prices of
their goods and services. When this happens across a large number of businesses and sectors,
this leads to an increase in inflation.
Inflation is the rate of increase in prices over a given period of time.
Inflation is typically a broad measure, such as the overall increase in
prices or the increase in the cost of living in a country.

While high inflation is generally considered harmful, some economists believe

that a small amount of inflation can help drive economic growth. The opposite
of inflation is deflation, a situation where prices tend to decline.Jan 9, 2023

While inflation may decrease the purchasing power of your dollars over time,
economists generally believe that a low, steady level of inflation is necessary
to drive economic growth.Sep 14, 2022

Inflation allows borrowers to pay lenders back with money worth less than when it was originally
borrowed, which benefits borrowers. When inflation causes higher prices, the demand for credit
increases, raising interest rates, which benefits lenders.

PHILIPPINE gross domestic product (GDP) growth is likely to fall slightly below the
government’s target this year, the ASEAN+3 Macroeconomic Research Office (AMRO)
said.

“The Philippines’ economic growth is projected to moderate to 5.9% in 2023 due to

high base effects and weaker external demand, before edging up to 6.5% in 2024 as
external demand recovers,” AMRO Group Head and Principal Economist Runchana
Pongsaparn said in a statement on Tuesday.

AMRO kept its Philippine growth forecast for 2024 unchanged at 6.5% amid an
expected recovery in external demand. This is at the lower end of the government’s
6.5-8% target for next year.

The think tank noted the Philippine economy continued to show strong growth
momentum in the first half of 2023. Philippine GDP expanded by a weaker-than-
expected 4.3% in the second quarter, bringing the first semester growth to 5.3%.
“Growth was supported by resilient domestic demand with a strong recovery in the
labor market despite weaker external demand. Notwithstanding a widening current
account deficit, external position remains sound with sufficient international reserve
buffer and low external debt,” AMRO said.

MANILA – The volume and value of local trade posted double-digit growth in the
first quarter of the year, the Philippine Statistics Authority (PSA) reported.

Data released late Monday showed that the value of domestic trade amounted to
PHP199.72 billion, up by 46.7 percent from the PHP136.18 billion a year ago.

By mode of transport, almost all of the commodities were traded through water, while
the remaining were traded through air.

"Machinery and transport equipment topped in terms of value of traded commodities

with PHP68.24 billion or 34.2 percent share to the total domestic trade value in the
first quarter of 2023," PSA said.

This was followed by food and live animals and manufactured goods classified chiefly
by material.

Among the regions, Western Visayas recorded the highest value of traded
commodities with PHP44.70 billion, followed by Central Visayas with PHP42.90
billion and Eastern Visayas with PHP26.01 billion.

In terms of volume, the PSA said total quantity of domestic trade in in the first quarter
reached 5.34 million tons, higher by 56.7 percent from last year's 3.41 million tons.

"By commodity section, food and live animals led in terms of quantity of domestic
trade in the first quarter of 2023 with 1.31 million tons or a share of 24.6 percent to
the total domestic trade," PSA said.

This was followed by mineral fuels, lubricants and related materials with 1.25 million
tons and machinery and transport equipment with 1.04 million tons.

Central Luzon registered the highest quantity of traded commodities with 1.29 million
tons or 24.1 percent share to the total domestic trade in the first quarter of 2023.

This was followed by Central Visayas with 1 million tons and Western Visayas with
660,000 metric tons. (PNA)
Related Stories

Philippines: Merchandise exports increase in May

Merchandise exports climbed 1.9% annually in May, following April’s 20.2% dive.
May’s figure marked the strongest outturn since November 2022. Meanwhile,
merchandise imports contracted 8.8% in annual terms in May (April: -15.0% yoy).

As a result, the merchandise trade balance improved from the previous month,
recording a USD 4.4 billion shortfall in May (April 2023: USD 4.8 billion deficit;
May 2022: USD 5.6 billion deficit). Lastly, the trend improved, with the 12-month
trailing merchandise trade balance recording a USD 58.3 billion deficit in May,
compared to the USD 59.4 billion deficit in April.