Determine whether each of the following topics would more likely be studied in microeconomics or macroeconomics.
a. The effect of a large government’s budget deficit on the economy’s price level
b. The effect of government regulation on a monopolist’s production decisions
c. A consumer’s optimal choice when buying a flat-screen TV
Answer: The correct options are a, b and c.
Macroeconomics concerns elements such as the inflation factor, the employment factor, the growth factor, and the governmental factors as refer to the economy in the broadest terms. The discussion of the budget deficit of a government and price level returns to macroeconomics since this branch of knowledge considers the assessment of fiscal policies with the general factors of the economy.
As for the other definition, microeconomics is defined as the subject that focuses on individual participants in the economy or more specifically, consumers and different forms of economic units such as firms and industries. The decision to produce by a monopolist or the best product to buy by a consumer that will be the situation of intending to buy a specific commodity are all microeconomics categories because they are made or created to relate themselves to concrete individual choices and transactions in the marketplace.