Understanding microeconomics Essay Example | Topics and Well Written Essays - 1500 words

Understanding microeconomics - Essay Example Microeconomics deals with the study of human actions and behaviors, which have the tendency to affect the supply and demand system, whereas macroeconomics deals with the behavior of the whole economy. In this paper, we will not only discuss different indicators of macroeconomics. Along with that, we will also analyze the importance of aggregate demand and aggregate supply in the field of economics. We will also discuss the reasons for the shifts in the aggregate demand curve and the aggregate supply curve in order to get a better understanding of the importance of aggregate demand and aggregate supply in the field of macroeconomics. Macroeconomics Macroeconomics is one of the major branches of economics and it is deals with the performance and structure of the overall economy of any specific country. â€Å"The field of economics known as macroeconomics focuses on the behaviors of a national economy, or a regional economy, as a whole† (Bram). The study of macroeconomics leads e conomists to the use of governmental policies to create an economic change in order to avoid depressions and other shocks related to the economy. â€Å"Macroeconomics can be best understood in contrast to microeconomics which considers the decisions made at an individual or firm level† (Moffatt). Macroeconomics focuses on the behavior and dimensions of the whole economy and is primarily concerned with a number of large-scale indicators of economy. The economists need to consider many factors in order to properly analyze the economy of a country. Some of the main factors, which the economists take into account while analyzing the economy, include rate of inflation, general behavior of price, unemployment, and production of goods and services. Macroeconomists perform a thorough analysis of these indicators in order to understand the current position and functioning of any domestic economy. In this paper, we will discuss unemployment, inflation, and production, which are the mos t important indicators of economy. Let us discuss these factors in some detail in order to get a better understanding of how these indicators reflect the economy of a country. Unemployment Unemployment is one of the most important phenomenons related to cyclical fluctuations in the economy. Unemployment rate is the ratio of the unemployed workforce to the overall size of the labor force of an economy. â€Å"In a healthy economy, a certain degree of unemployment indicated as a percentage reflects the fact that there constantly are job seekers and employers voluntarily running after better opportunities for their own good† (Yang). There are various types of unemployment, which reflect the reasons of unemployment in an economy. Some of the major types of unemployment include frictional unemployment, structural unemployment, seasonal unemployment, and cyclic unemployment. The economists find the rate of unemployment by dividing the total number of unemployed people by the labor f orce of a country which is the sum of total number of employed and unemployed people. Increased rate of unemployment is not a good sign for the economy of a country because unemployment is a factor, which not only results in loss of output but also decreases the income of the people living in any specific country. Inflation Inflation is another large-scale indicator of economy, which is associated with the rate of change in the level of prices. â€Å"