For those of you embarking on a course in economics, one of the first things you’ll come across is the distinction between microeconomics and macroeconomics. The news is full of both microeconomic and macroeconomic issues and you’ll quickly see how relevant both branches of economics are to analysing real-world events, problems and policies.
As we state in Economics (updated 10th edition), ‘microeconomics is concerned with the individual parts of the economy. It is concerned with the demand and supply of particular goods, services and resources such as cars, butter, clothes, haircuts, plumbers, accountants, blast furnaces, computers and oil.’ In particular, it is concerned with the buying, selling, production and employment decisions of individuals and firms. When you go shopping and make choices of what to buy you are making microeconomic decisions. When firms choose how much of particular products to produce, what techniques of production to use and how many people to employ, these choices are microeconomic ones.
Microeconomics examines people’s behaviour when they make choices. In fact many of the recent developments in microeconomics involve analysing the behaviour of individuals and firms and the factors that influence this behaviour.
Open any newspaper, turn on the TV news or access any news site and you will see various microeconomic issues covered. Why are rents soaring? How is AI affecting various businesses’ productivity? How rapidly is the switch taking place to green energy? How do supermarkets influence spending patterns? Why are wages so low in the social care sector? Why are private PCR tests so expensive for holidaymakers retuning from abroad?
Many of the blogs on this news site will examine microeconomic issues. We hope that they provide useful case studies for your course.
Articles
- Microeconomics explains why people can never have enough of what they want and how that influences policies
- Guide to Microeconomics
- Microeconomics
The Conversation, Amitrajeet A. Batabyal (31/8/21)
Investopedia, Brent Radcliffe (7/6/21)
Wikipedia
Questions
- Look through news sites and identify five current microeconomic issues. What makes them ‘micro’ issues?
- If world oil and gas prices rise, why is this a microeconomic issue?
- What do you understand by ‘scarcity’? How is microeconomics related to scarcity?
- Are all goods scarce?
- What is meant by ‘opportunity cost’? Give some examples of how opportunity cost has affected recent decisions you have made.