Question

Which of the following problems are likely to be studied by a microeconomist and which by a macroeconomist? a. The rapid growth of Twitter b. Why unemployment in the United States fell from 2010 to 2018 c. Why Japan's economy grew faster than the U.S. economy in the \(1980 \mathrm{~s}\), but slower in the \(2000 \mathrm{~s}\) d. Why the growth of health-care costs slowed down in recent years

Short answer

a) Twitter's rapid growth b) U.S. unemployment decline between 2010 and 2018 c) Comparison of Japan's and U.S. economic growth in the 1980s vs. 2000s d) Slowed growth of health-care costs

Step-by-step solution

Problem a: Twitter's rapid growth

A microeconomist would be more likely to study this problem, as it focuses on the growth of a single company and the factors that have contributed to that growth.

Problem b: U.S. unemployment decline between 2010 and 2018

A macroeconomist would be more likely to study this problem, as it relates to a broad, widespread economic change that has occurred over several years and which affected the entire U.S. population in some way.

Problem c: Comparison of Japan's and U.S. economic growth in the 1980s vs. 2000s

A macroeconomist would be more likely to study this problem, as it involves comparing the overall economic growth of two countries over time, which is a core focus of macroeconomics.

Problem d: Slowed growth of health-care costs

This problem could arguably be studied by both microeconomists and macroeconomists, depending on the scope and specific focus of the study. For example, a microeconomist might examine the impact of slowed health-care cost growth on individual consumers and businesses, while a macroeconomist might evaluate the broader implications for the overall economy and government spending.

Key concepts

Microeconomics

Microeconomics is the branch of economics that examines the behavior of individuals and firms in making decisions regarding the allocation of scarce resources. It focuses on the dynamics of supply and demand, price, and output in individual markets. When considering the exercise problem regarding Twitter's rapid growth, this is a clear example of a microeconomic study.

• Microeconomics analyzes market mechanisms that establish relative prices among goods and services.
• It investigates how businesses decide on their outputs, how they are competitive, and what strategies they implement to grow.
• Microeconomic studies can provide insights into how individual firms succeed in a competitive marketplace.

Understanding microeconomics can reveal why certain companies, like Twitter, experience rapid growth while others may not. Factors such as market demand, company strategy, and competitive advantage are key elements in microeconomic analysis.

Economic Growth

Economic growth refers to the increase in the production of goods and services in an economy over a period of time. It is usually measured as the percentage increase in real gross domestic product (GDP).

• Economic growth is influenced by factors such as technological innovation, improving infrastructure, and an increase in labor or capital.
• This growth can be accelerated or slowed by government policy, economic stability, and external factors such as global economic trends.

In the exercise, the problem relating to the comparison of Japan's and U.S. economic growth in different decades is an example of a macroeconomic study of economic growth. Examining why one country grows faster than another involves analyzing broad factors like government policy, trade relations, and resource allocations.

Unemployment

Unemployment is a critical issue in macroeconomics as it has widespread implications for the economy and society. It is defined as the situation where individuals who are capable of working and are actively seeking work are unable to find employment.

• Unemployment rates are one of the most closely watched indicators of economic performance.
• High unemployment can lead to economic stagnation, reduced consumer spending, and increased government welfare.
• Different types of unemployment include cyclical, structural, and frictional, each with distinct causes and policy implications.

Analyzing why unemployment in the United States fell from 2010 to 2018 involves understanding various macroeconomic policies and market conditions. This study would explore the impact of economic recovery measures, job creation programs, and changes in the labor market.

Health-Care Costs

Health-care costs refer to the expenses related to medical services, including prevention, treatment, and management of illness. These costs are a significant portion of a country's overall expenditures and can influence both individual and national economic well-being.

• Factors impacting health-care costs include technological advancements, demographic trends, and insurance systems.
• Reducing health-care costs can improve access to medical services and increase economic sustainability.
• The exercise problem focuses on the slowed growth of health-care costs and demonstrates a subject that could be studied from both macroeconomic and microeconomic perspectives.

Understanding these costs can lead to better policy decisions and more efficient health-care delivery, ultimately influencing the economy's productivity and citizens' general welfare.