Macro vs. Micro
Lesson objectives • Define key terms in the field of business economics • Display understanding of the use of graphical tools as representations of macroeconomic and microeconomic principles • Identify the differences and similarities between macroeconomics and microeconomics • Describe why business economics is an important field of study
How do Businesses make choices? • Economics is the study of how people and organizations make choices in conditions of scarcity • Individuals and households make choices in order to make the most out of their limited resources to meet their needs and wants • Businesses likewise make choices as they convert limited resources into goods and services to meet our needs and wants, thereby maximizing their profit
How do Businesses Make Choices? • • • How does a company decide what to make? The average price of a Big Mac is $3. 10. What does it cost to produce? Who buys it? Is this a good price? For whom? Price $3. 10 $5. 00 $0. 50 Yes/no For Whom
How do Businesses Make Choices? • All of these business questions are just as relevant to the economist, whose primary area of study is how people, organizations, and societies make choices
The Market Economy • Get into pairs and discuss the following: • Who makes decisions about whether or not Mc. Donald’s is going to sell Big Macs? • Who decides what price to charge for them? • Who determines how much to pay Mc. Donald’s employees? • What goals is Mc. Donald’s working toward when it makes these decisions?
The Market Economy • A market economy is built upon two key players—consumers and producers. The interaction between these two key players answers the first two questions posed. • Another two key players in the market economy—businesses and individuals (as employees or prospective employees), and the interaction between them—answers the third question. • Profit by providing products that consumers want to buy is the answer to the final question.
Choices and Limited Resources • Presentation
Key Terms in Economics • Add new economic terms to your taxonomies • The Power. Point titled: Micro vs. Macro covers the previous lesson.
Definition of Macroeconomics • Macroeconomics is an area of study that: • seeks to determine the aggregate (total) effect of interaction between all buyers and sellers in a market by measuring: 1. gross domestic product (GDP): the total amount of goods and services a country (the United States, for example) produces in a year. 2. rate of inflation: how much prices go up in a given amount of time. 3. unemployment rate 4. fiscal policy: where and how much money the government spends in the economy and takes in through taxes. 5. monetary policy: how much money is in circulation in the economy (this is referred to as monetary policy).
Definition of Microeconomics • Microeconomics is an area of study that: • seeks to determine how individuals and businesses make decisions and the consequences of these decisions by measuring: 1. the impact of supply and demand on a business. 2. the costs and benefits of individual and business consumption and production and pricing decisions. 3. the effects of competition.
Definitions of Micro and Macro economics • Download- Reading: Microeconomics Explained • Download- Reading: Macroeconomics Explained • Highlight or underline key terms and concepts
Venn Diagram • Download- Venn Diagram: Macroeconomics vs. Microeconomics • Think about how different players in a market economy might be more or less impacted by what each field covers • Turn into dropbox
Compare and Contrast • How would you incorporate the terms: • • Business Individuals Government Non-profit agencies • Indicate the importance to or the impact each term has the given category • Why would governments and businesses be more concerned with macroeconomics than individuals? • Why would businesses and individuals be more concerned with microeconomics than government?
The Power of Graphs • Download- Assignment: The Power of Graphs • Which graph gets the point together and why? • Because economic information is primarily numbers, it lends itself to graphic representation. • Both economists and businesspeople love graphs because they get a lot of information across in a concise and clear way
The Power of Graphs • Create a nonlinguistic representation of the macroeconomic issue of national debt • Be sure to use correct spacing and keep things to scale
Big Mac vs. the Whopper • What would happen to Big Mac sales if Burger King increased the price of the Whopper to $5? Cut the price to 50¢?
Enrichment • Watch the 20 -minute “Story of Stuff” online at http: //www. storyofstuff. com/ and then write two short responses. • The first should be about how the video relates to microeconomics. • The second should be about how it relates to macroeconomics.
Cross-Curricular Integration • Research the command economy system and to complete a Venn diagram comparing it with a market economy.