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Chapter 1: Q 5. (page 24)

What would be another example of a "system" in the real world that would serve as a metaphor for micro and macroeconomics?

Short Answer

Expert verified

Solar system is an example.

Step by step solution

01

Step 1. Meaning of micro and macroeconomics.

Microeconomics focuses on the actions of particular agents within the economy, such as households, workers, as well as business firms is termed as microeconomics.

Whereas on the other hand, macroeocnomics focuses on broad issues such as unemployment, inflation, growth and trade balance is termed as macroeconomics.

02

Step 2. The system in real world.

The solar system could work as a metaphor. The study of a single planet in the whole system is similar to the study of microeconomics while. On the other hand, the study of the solar system as a whole represents macroeconomics.

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Most popular questions from this chapter

Adam Smith’s “invisible hand” refers to:

  1. The subtle and often hidden methods that businesses use to profit at customers’ expense.
  2. The ability of free markets to reach desirable outcomes, despite the self-interest of market participants.
  3. The ability of government regulation to benefit consumers even if the consumers are unaware of the regulations.
  4. The way in which producers or consumers in unregulated markets expose costs on innocent bystanders.

A 1996 bill reforming the federal government’s antipoverty programs limited many welfare recipients to only 2 years of benefits.

  1. How does this change affect the incentives for working?
  2. How might this change represent a trade-off between equality and efficiency?

Describe some of the trade-offs faced by each of the following:

a. a family deciding whether to buy a new car

b. a member of Congress deciding how much to spend on national parks

c. a company president decidingwhether to open a new factory

d. a professor deciding how much to prepare for class

e. a recent college graduate deciding whether to go to graduate school

The company that you manage has invested \(5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to \)3 million. If it would cost $1 million to finish development and make the product, should you go ahead and do so? What is the most that you should pay to complete development?

Macroeconomics is an aggregate of what happens

at the microeconomic level. Would it be possible for

what happens at the macro level to differ from how

economic agents would react to some stimulus at the

micro level? Hint: Think about the behavior of crowds.
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