Ladies and gentlemen, today, I would like to discuss the major differences between microeconomics and macroeconomics and how both these fields of study impact and influence decisions made by me in the work and home environments. Microeconomics is the study of decisions that people and organizations make regarding the allocation of scarce resources and prices of goods and services (Perloff, 2007).
Microeconomics focuses on the patterns of supply and demand and the determination of price and also output in individual markets. These decisions are also nfluenced by government. It is the smaller or micro picture of economics at the individual, household and company level. Macroeconomics is the bigger picture of economics. It studies the aggregate or combined impact of certain consequences such as inflation, unemployment and economic growth that were the result of social decisions in both the public and private sectors. It examines whole economic systems and the interaction of the different areas such as inflation and unemployment.
An example of a microeconomic phenomenon is the impact of a change in the price of good or service on the spending decisions of a household. Also changes in the unemployment rates will influence a decision to stay or leave a present position. Examples of macroeconomic phenomenon include looking at changes in interest rates, employment and unemployment numbers, government economic policies and trade on global economies.
I would like to discuss an example of a microeconomic decision that was made in the home environment. The decision was to file bankruptcy and relieve ourselves of large amounts of debt incurred because of medical expenses due to infertility issues. One factor as our decision to have my wife leave work to stay at home with our children. This eliminated a source of income for us but it was the right thing to do. As a family, we had to decide to allocate our scarce resource of discretionary income towards day to day expenses rather than try to pay down debt that would have taken years to pay back. We sacrificed a good financial history and immediate future credit to regain control of our financial future.
The bankruptcy influenced our buying tendencies and sparked a move toward trimming the fat and saving where we could. In the long run, we have improved ur financial standing and we were able to have children. There were trade-offs, but the ends justified the means. An example of a macroeconomic decision that impacted a personal decision can be found in my decision to remain with my present company rather than accept a new position with another firm. The phenomenon was the impact on the economy and employment of the attacks on the World Trade centers and the Pentagon. I was in the process of accepting a new position with a new company when the attacks occurred. The immediate effect on the aviation industry caused me to pause and wait to see how things would change.
I did not accept the new offer and chose to remain with my present employer. The end result was that the employer I was leaving for ended up going out of business and I would have been unemployed. I remained with my company and have since been promoted and upgraded to captain. Microeconomics and macroeconomics affect all of us on a daily basis and influence how we live our lives. Decisions based on these principles happen every day in home and work environments and also on the global stage with world economies.
- Perloff, J. M. (2004). Microeconomics ( 3rd ed. ). New York: Pearson Addison Wesley.