Compare and comparison the key micro and macroeconomic theories of foreign immediate investment. Referring to your home country appraise which of the theories most effectively explains the pattern of foreign immediate investment in recent years.
Microeconomics studies the economic actions and behaviour of individual units and small groups of individual units. In microeconomic theory we discuss how the various cells of economic organism, that is, the various units of the economy such as thousands of consumers, thousands of producers or firms, thousands of workers and resource suppliers in the economy do their economic activities and reach their equilibrium states.
In other words, in microeconomics we make a microscopic study of the economy. But it should be remembered that microeconomics does not study the economy in its totality. Instead, in microeconomics we discuss equilibrium of innumerable units of the economy piecemeal and their inter-relationship to each other.
For instance, in microeconomic analysis we study the demand of an individual consumer for a Class test on micro economics essay and from there go on to derive the market demand for the good that is, demand of a group of individuals consuming a particular good.
Likewise, microeconomic theory studies the behaviour of the individual firms in regard to the fixation of price and output and their reactions to the changes in the demand and supply conditions. From there we go on to establish price-output fixation by an industry Industry means a group of firms producing the same product.
Thus, microeconomic theory seeks to determine the mechanism by which the different economic units attain the position of equilibrium, proceeding from the individual units to a narrowly defined group such as a single industry or a single market.
Since microeconomic analysis concerns itself with narrowly defined groups such as an industry or market. However it does not study the totality of behaviour of all units in the economy for any particular economic activity.
In other words, the study of economic system or economy as a whole lies outside the domain of microeconomic analysis.
Microeconomic theory takes the total quantity of resources as given and seeks to explain how they are allocated to the production of particular goods. It is the allocation of resources that determines what goods shall be produced and how they shall be produced.
The allocation of resources to the production of various goods in a free-market economy depends upon the prices of the various goods and the prices of the various factors of production. Therefore, to explain how the allocation of resources is determined, microeconomics proceeds to analyse how the relative prices of goods and factors are determined.
Thus the theory of product pricing and the theory of factor pricing or the theory of distribution falls within the domain of microeconomics. The theory of product pricing explains how the relative prices of cotton cloth, food grains, jute, kerosene oil and thousands of other goods are determined.
The theory of distribution explains how wages price for the use of labourrent payment for the use of landinterest price for the use of capital and profits the reward for the entrepreneur are determined.
Thus, the theory of product pricing and the theory of factor pricing are the two important branches of microeconomic theory. Prices of the products depend upon the forces of demand and supply.
Thus the demand and supply sides have to be analysed in order to explain the determination of prices of goods and factors. Thus the theory of demand and the theory of production are two subdivisions of the theory of pricing.
Microeconomics as a Study of Economic Efficiency: Besides analysing the pricing of products and factors, and the allocation of resources based upon the price mechanism, microeconomics also seeks to explain whether the allocation of resources determined is efficient.
Efficiency in the allocation of resources is attained when the resources are so allocated that maximises the satisfaction of the people. Economic efficiency involves three efficiencies; efficiency in production, efficiency in distribution of goods among the people This is also called efficiency in consumption and allocative economic efficiency, that is, efficiency in the direction of production.
Microeconomic theory shows under what conditions these efficiencies are achieved. Microeconomics also shows what factors cause departure from these efficiencies and result in the decline of social welfare from the maximum possible level.
Economic efficiency in production involves minimisation of cost for producing a given level of output or producing a maximum possible output of various goods from the given amount of outlay or cost incurred on productive resources.
When such productive efficiency is attained, then it is no longer possible by any reallocation of the productive resources or factors among the production of various goods and services to increase the output of any good without a reduction in the output of some other good.
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. When such efficiency is achieved it is no longer possible by any redistribution of goods among the people to make some people better off without making some other ones worse off.
Allocative economic efficiency or optimum direction of production consists of producing those goods which are most desired by the people, that is, when the direction of production is such that maximizes social welfare.
In other words, allocative economic efficiency implies that pattern of production i. Even if efficiencies in consumption and production of goods are present, it may be that the goods which are produced and distributed for consumption may not be those preferred by the people.Class Test on Micro Economics Essay Class Test on Micro Economics Grade 12 CBSE Mgmt i) All questions in this section are compulsory ii) Marks for questions are indicated against each iii) Answers for very short answer questions carrying 1 mark must be answered in ONE sentence each iv) Answers for short answer questions carrying 3 .
Aug 05, · Here are some essay topic ideas for your microeconomics class: An Argumentative Essay on the Microeconomic Market Structures; How Do Different Microeconomic Market Structures Affect Supply?
The Impact of Labor Market and the Labor Union on Supply and Demand.
|Preparation||What is economics about?|
Views · View Upvoters. AP’s high school Microeconomics course is a rigorous, college-level class that provides an opportunity to gain the skills and experience colleges recognize. Microeconomics: Essay on Microeconomics. Article Shared by. The question of economic efficiency is the subject-matter of theoretical welfare economics which is an important branch of microeconomic theory.
Another class of departure from welfare optimum is the problem of externalities.
Externalities are said to exist when the production. Class Test on Micro Economics Grade 12 CBSE Mgmt i) All questions in this section are compulsory ii) Marks for questions are indicated against each.
The AP Microeconomics Exam measures students' knowledge of microeconomics principles and their ability to reason within the discipline. Encourage your students to visit the AP Microeconomics student page for exam information and exam practice.