Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Economics is divided into two categories: microeconomics and macroeconomics. Microeconomics is the study of individuals and business decisions, while macroeconomics looks at the decisions of countries and governments. Though these two branches of economics appear different, they are actually interdependent and complement one another.
Many overlapping issues exist between the two fields. Microeconomics is the study of decisions made by people and businesses regarding the allocation of resources, and prices at which they trade goods and services. It considers taxes, regulations and government legislation. Microeconomics focuses on supply and demand and other forces that determine price levels in the economy.
It takes a bottom-up approach to analyzing the economy. In other words, microeconomics tries to understand human choices, decisions and the allocation of resources.
Having said that, microeconomics does not try to answer or explain what forces should take place in a market. Rather, it tries to explain what happens when there are changes in certain conditions.
For example, microeconomics examines how a company could maximize its production and capacity so that it could lower prices and better compete.
A lot of microeconomic information can be gleaned from company financial statements. Microeconomics involves several key principles, including but not limited to :.
The rules in microeconomics flow from a set of compatible laws and theorems, rather than beginning with empirical study. Macroeconomics , on the other hand, studies the behavior of a country and how its policies impact the economy as a whole. It analyzes entire industries and economies, rather than individuals or specific companies, which is why it's a top-down approach.
It tries to answer questions such as, "What should the rate of inflation be? Macroeconomics examines economy-wide phenomena such as gross domestic product GDP and how it is affected by changes in unemployment, national income, rates of growth and price levels. Macroeconomics analyzes how an increase or decrease in net exports impacts a nation's capital account, or how gross domestic product GDP is impacted by the unemployment rate.
Macroeconomics focuses on aggregates and econometric correlations , which is why governments and their agencies rely on macroeconomics to formulate economic and fiscal policy. Investors who buy interest-rate sensitive securities should keep a close eye on monetary and fiscal policy. Outside a few meaningful and measurable impacts, macroeconomics doesn't offer much for specific investments.
John Maynard Keynes is often credited as the founder of macroeconomics, as he initiated the use of monetary aggregates to study broad phenomena. Some economists dispute his theories , while many Keynesians disagree on how to interpret his work.
Individual investors may be better off focusing on microeconomics rather than macroeconomics. It is categorized under Indirect Tax and came into existence under the Finance Act, Description: In this case, the service provider pays the tax and recovers it from the customer.
Service Tax was earlier levied on a specified list of services, but in th. A nation is a sovereign entity. Any risk arising on chances of a government failing to make debt repayments or not honouring a loan agreement is a sovereign risk. Description: Such practices can be resorted to by a government in times of economic or political uncertainty or even to portray an assertive stance misusing its independence. A government can resort to such practices by easily altering.
A recession is a situation of declining economic activity. Declining economic activity is characterized by falling output and employment levels.
Generally, when an economy continues to suffer recession for two or more quarters, it is called depression. Description: The level of productivity in an economy falls significantly during a d.
It is always measured in percentage terms. Description: With the consumption behavior being related, the change in the price of a related good leads to a change in the demand of another good. Related goods are of two kinds, i. Description: Apart from Cash Reserve Ratio CRR , banks have to maintain a stipulated proportion of their net demand and time liabilities in the form of liquid assets like cash, gold and unencumbered securities.
Treasury bills, dated securities issued under market borrowing programme. In the world of finance, comparison of economic data is of immense importance in order to ascertain the growth and performance of a compan.
Description: Institutional investment is defined to be the investment done by institutions or organizations such as banks, insurance companies, mutual fund houses, etc in the financial or real assets of a country. Simply state. Marginal standing facility MSF is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.
In economics, the micro decisions of individual businesses are influenced by whether the macroeconomy is healthy; for example, firms will be more likely to hire workers if the overall economy is growing. In turn, the performance of the macroeconomy ultimately depends on the microeconomic decisions made by individual households and businesses. What determines how households and individuals spend their budgets?
What combination of goods and services will best fit their needs and wants, given the budget they have to spend? How do people decide whether to work, and if so, whether to work full time or part time?
How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means? What determines the products, and how many of each, a firm will produce and sell? What determines what prices a firm will charge? What determines how a firm will produce its products? What determines how many workers it will hire? How will a firm finance its business?
When will a firm decide to expand, downsize, or even close? In the microeconomic part of this book, we will learn about the theory of consumer behavior and the theory of the firm. What determines the level of economic activity in a society? In other words, what determines how many goods and services a nation actually produces? What determines how many jobs are available in an economy?
What causes the economy to speed up or slow down? What causes firms to hire more workers or to lay workers off? Finally, what causes the economy to grow over the long term?
How can macroeconomic policy be used to pursue these goals?
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