Mmpl 501 - Microeconomics Branch of Economics

Lanette Polak

University of Phoenix

MMPL 501/ Forces Influencing the 21st Century

Mr. Frank Kingsland

May 21, 2011

Concept

Microeconomics

The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets (e.g. coffee industry), according to (Investopedia, 2011).

Microeconomics is considered as the smaller picture, and explains the theories of supply and demand. Businesses have to decide how many products to produce and a price to sell them for to the consumers. People who want to start their own business would be interested in the rationale of pricing particular products and services (Investopedia, 2011).

Personal Example

In the natural gas market, gas is in supply all year round. Natural gas to heat people's homes is in increases in demand in the winter time. The supply could eventually run low depending upon where Shell gets its gas from. Natural gas is in less demand in the summer time. There is no control over if the price of a therm may go up anytime with People's Gas. I worked for Just Energy for one week last year in June and quit because they wanted to charge customers' .79 per therm and lock customers' in a five year contract when it costs less to remain on a flexible plan with People's Gas. The electricity industry makes a lot of business in the summer due to the hot weather and consumers' using the air conditioner to cool down their homes. Electricity is always in demand and demand increases in the summer due to the weather.

For example, if a bunch of oranges are on sale at a very low price the consumer will buy many quantities of the product; if the price of the orange is high for consumers then they will buy few. Income affects how much money consumers' will spend buying products and services. Business have to compete against each other, for example, Butera had tuna fish on sale last week for .69 a can and CVS had tuna fish on sales for .77 a can; the price of a product will start at a low price and rise. Businesses have to buy the product from another company and then increase the price of the product before they sell it to the consumer to make a profit. Reference to Concept in Reading

Microeconomics is a measure of specific economic units, which are an individual industry, firm, or household.

We measure

The price of a specific product, the number of workers employed by a single firm, the revenue or income of a particular firm or household, or the expenditures of a specific firm, government entity, or family. Economists recognize that the decisions made by individual workers in searching for jobs and the way specific product and labor markets operate are also critical in determining the unemployment rate, according to (Mc Connell & Brue, 2005, 7).

Macroeconomics looks at the big picture in terms of buying, selling, saving, and producing. "Macroeconomics tries to predict how they will affect the economic life of a country and its population," states (The Learning House, Inc, 2011). The things that make up macroeconomics are Wealth of Nations, Introduction to Public Choice Theory, John Maynard Keyes and Say's Law and Supply Side. Macroeconomics determines how the unemployment rate is affected in a country. It determines how money circulations in society have effect on wages and unemployment, according to (The Learning House, Inc, 2011). As an employee, macroeconomics has affected my life. The unemployment rate about around 15% in the last year during the recession, and the last job I had paid me minimum wage in the state of Illinois, which is $8.25 per hour. The prices are constantly rising in the state of Illinois; gas to tank a car at BP is almost $4.59 per gallon right now.

The United States buys everything that is Made in China; a lot of my clothes are from China. It is hard not to buy something that is made in China because of the cheap child labor. My Nike's are Made in China. The inflation of the dollar bill is an example of how the value of the dollar bill has gone up over the years. In 1950's things were cheaper than they are now. Labor was cheaper long ago, and employers' now are trying to buy cheap labor. It is very difficult to make the dollar go bill go far. It takes my husband $40 to tank his 2008 Mitsubishi Lancer, and almost $40 to tank his 2009 Toyota Yaris in 2011 and a few years ago it cost about $30 to tank the Mitsubishi Lancer. Macroeconomics examines the either the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sectors.

Macroeconomics seeks to obtain a general overview of the structure of the economy and the relationships of its major aggregates. Macroeconomics speaks of such economic measures as total output, total employment, total income, aggregate expenditures, and the general level of prices in analyzing various economic problems, according to (Mc Connell & Brue 2005, 7).

Equilibrium

State of stable conditions in which all significant factors remain in more or less constant over a period, and there is little or no inherent tendency for change. For example, a market is said to be in equilibrium if the amount of goods that buyers wish to buy at the current price is matched by the amount the sellers want to sell at that price. Also called steady state (Business Dictionary.com, 2010).

The state in which market supply and demand balances each other and, as a result, prices become stable. Generally, when there is too much supply for goods and services, the price goes down, which results in higher demand. The balancing effect of supply and demand results in a state of equilibrium. The equilibrium price is where the supply of goods matches demand. When a major index experiences a period of consolidation or sideways momentum, it can be said that the forces of supply and demand are relatively