Once the theory is verified and proved true, possible solutions or suggestions to the problem under investigation are to be formulated. It provides a number of tools with which the economists analyse economic problems.
The second step is to collect data or facts pertaining to the problem to be explored. To sum up, allocative efficiency optimum direction of production is achieved when the resources are so allocated to the production of various goods that the maximum possible satisfaction of the people is obtained.
And facts based on verified hypotheses are raised to the status of a theory. It is generally understood that microeconomics does not concern itself with the economy as a whole and an impression is created that microeconomics differs from macroeconomics in that whereas the latter examines the economy as a whole; the former is not concerned with it.
Both microeconomics and macroeconomics analyse the economy but with two different ways or approaches. Departure from perfect competition leads to a lower level of welfare, that is, involves loss of economic efficiency.
Economics is a science which like any other science depends on an organised body of theoretical knowledge.
Microeconomic theory spells out the conditions of efficiency i. A scientist can conduct his investigations by experimenting under controlled conditions in a laboratory. Efficiency in consumption consists of distributing the given amount of produced goods and services among millions of the people for consumption in such a way as to maximize the total satisfaction of the society.
Perfect competition is said to exist when there are so many sellers and buyers in the market so that no individual seller or buyer is in a position to influence the price of a product or factor. These conditions called Pareto-optimal conditions can be of the greatest help in raising the standard of living of the population.
They also apply to developed and developing economies. That is why Mrs. But microeconomic theory, as stated above, also concerns itself with general equilibrium analysis of the economy wherein it is explained how all the economic units, various product markets, various factor markets, money and capital markets are interrelated and interdependent to each other and how through various adjustments and readjustments to the changes in them, they reach a general equilibrium, that is, equilibrium of each of them individually as well as collectively to each other.
Microeconomics shows how monopoly leads to misallocation of resources and therefore involves loss of economic efficiency or welfare. It shows how the relative prices of various products and factors are determined, that is, why the price of cloth is what it is and why the wages of an engineer are what they are and so on.
Thus the demand and supply sides have to be analysed in order to explain the determination of prices of goods and factors. Externalities are said to exist when the production or consumption of a commodity affects other people than those who produce, sell or buy it.
To Formulate and Understand Economic Policies: However, complicated problems may require many months or even years to collect the necessary data. Economics thus has descriptive, normative and predictive aspects. Furthermore, the determination of the foreign exchange rate of a currency, if it is free to vary, depends upon the demand for and supply of that currency.
The imposition of a tax on a commodity i. Further, microeconomic analysis is applied to show the damage done to the social welfare or economic efficiency by the imposition of a tax. The next step is the testing of the hypothesis formulated.New Classical Economics; Economics Research Paper Topics Part 5: International Economics Within these relatively vague definitions lie fascinating questions and critical policy implications.
Traditional economic analysis has been used to explain why people who are overweight tend to have lower incomes than those who are thin as well as why. Similarly, microeconomics brings out the welfare implications of oligopoly (or oligopsony) whose main characteristic is that individual sellers (or buyers) have to take into account, while deciding upon their course of action, how their rivals react to their moves regarding changes in price, product and advertising policy.
Free Economics papers, essays, and research papers. My Account. Your and the implications of these movements in economic growth, inflation, recession, productivity, budget deficits, trade deficits, and the value of our currency.
as his theories have become integral to America’s economic policy. A search of “John Maynard Keynes” on. The principal feature of the Immiserizing Growth theory is the phenomenon of positive economic growth and subsequently an inferior outcome, the the. Essay on the Uses of Economic Theory Essay on Economic Theory and Economic Policy Essay on the Limitations of Economic Theory; Essay # 1.
Meaning of Economic Theory: Economics is a science which like any other science depends on an organised body of theoretical knowledge. Theoretical knowledge is based on facts. The purpose of this essay is to discuss economic conditions in the Eleventh District and the U.S.
I will also discuss the implications of this assessment for the stance of monetary policy in the U.S.Download