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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’s choice to have a baby.

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

(e) The national government’s budget deficit.

(f) A student’s 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

Consider two models for estimating, in advance of an election, the shares of votes that will go to rival candidates. According to one model, pollsters’ surveys of a randomly chosen set of registered voters before an election can be used to forecast the percentage of votes that each candidate will receive. This first model relies on the assumption that unpaid survey respondents will give truthful responses about how they will vote and that they will actually cast a ballot in the election. The other model uses prices of financial assets (legally binding IOUs) issued by the Iowa Electronic Markets, operated by the University of Iowa, to predict electoral outcomes. The final payments received by owners of these assets, which can be bought or sold during the weeks and days preceding an election, depending on the shares of votes the candidates actually end up receiving. This second model assumes that owners of these assets wish to earn the highest possible returns, and it indicates that the market prices of these assets provide an indication of the percentage of votes that each candidate will actually receive on the day of the election.

(a) Which of these two models for forecasting electoral results is more firmly based on the rationality assumption of economics?

(b) How would an economist evaluate which is the better model for forecasting electoral outcomes?

Based on your answer to Problems 1–12, categorize each of the following conclusions as being the result of positive analysis or normative analysis.

(a) A higher minimum wage will reduce employment opportunities for minimum wage workers.

(b) Increasing the earnings of minimum wage employees is desirable, and raising the minimum wage is the best way to accomplish this.

(c) Everyone should enjoy open access to health care at no explicit charge.

(d) Heath care subsidies will increase the consumption of health care.

Suppose that the government has raised by $10 a per-carat tax rate it imposes on diamonds in an effort to influence the production of these particular goods by each of the firms that produce them and purchases by individual consumers. Would we apply microeconomic or macroeconomic analysis to analyze this policy action?

In what way do small talk and gossip represent the use of simplifying assumptions?

During her years of college, Dominique discovered that her three favorite subjects were astronomy, chemistry, and political science. She chose to major in astronomy because she had seen data indicating that science majors earn higher-than-average wages and because she liked astronomy better than both chemistry and political science. Upon graduation, however, she learned that average wages in chemistry fields were 20percent higher than average wages earned by astronomers. Did Dominique's behavior violate the rationality assumption?
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