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Chapter 1: Q 4 (page 14)

In a single sentence, contrast microeconomics and macroeconomics. Next, categorize each of the following issues as either a microeconomic issue, a macroeconomic issue, or not an economic issue.

(a) The national unemployment rate.

(b) The decision of a worker to work overtime or not.

(c) A family鈥檚 choice to have a baby.

(d) The rate of growth of the money supply.

(e) The national government鈥檚 budget deficit.

(f) A student鈥檚 allocation of study time across two subjects.

Short Answer

Expert verified

Microeconomics is the study of individuals and macroeconomics is the study of the whole economy.

(a) Macroeconomics

(b) Microeconomics

(c) Microeconomics

(d) Macroeconomics

(e) Macroeconomics

(f) Microeconomics

Step by step solution

01

Step 1. Definition of Economics

Economics refers to the satisfaction of wants for choosing alternative uses for efficient use of scarce resources.

02

Step 2. Microeconomics and Macroeconomics

Microeconomics is the study of individual behavior whereas macroeconomics is the study of the aggregates or the economy as a whole.

03

Step 3. Categorizing as microeconomics or macroeconomics.

(a) Macroeconomics.

The national unemployment rate studies the aggregate unemployment rate.

(b) Microeconomics.

The decision to work overtime is the decision of the worker which is an individual decision.

(c) Microeconomics

The family decision of having a baby is an individual decision confined to one family.

(d) Macroeconomics

The rate of growth of the money supply concerns the entire economy.

(e) Macroeconomics

The national government's budget deficit is because it considers the budget of the entire economy.

(f) Microeconomics

The allocation of study time is the individual's decision which here is the student.

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Most popular questions from this chapter

For each of the following approaches that an economist might follow in examining a decision-making process, identify whether the approach relies on the rationality assumption or on the assumption of bounded rationality:

(a) An economic study of the number of online searches that individuals conduct before selecting a particular item to purchase online presumes that people are interested only in their own satisfaction, pursue their ultimate objectives, and consider every relevant option.

(b) An economist seeking to predict the effect that an increase in a state's sales tax rate will have on consumers' purchases of goods and services resumes that people are limited in their ability to process information about how the sales-tax-rate increase will influence the after-tax prices those consumers will pay.

(c) To evaluate the impact of an increase in the range of choices that an individual confronts when deciding among devices for accessing the Internet, an economic researcher makes the assumption that the individual is unable to take into account every new Internet-access option available to her.

Consider the following statements, based on a positive economic analysis that assumes that all other things remain constant. For each, list one other thing that might change and thus offset the outcome stated.

(a) Increased demand for laptop computers will drive up their price.

(b) Falling gasoline prices will result in additional vacation travel.

(c) A reduction of income tax rates will result in more people working.

Explain why economics is a science.

Does the phrase 鈥渦nlimited wants and limited resources鈥� apply to both a low-income household and a middle-income household? Can the same phrase be applied to a very high-income household?

Define economics. Explain briefly how the economic way of thinking鈥攊n terms of rational, self-interested people responding to incentives鈥攔elates to each of the following situations.

(a) A student deciding whether to purchase a textbook for a particular class.

(b) Government officials seeking more funding for mass transit through higher taxes.

(c) A municipality taxing hotel guests to obtain funding for a new sports stadium.
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