Microeconomics
Microeconomics is concerned with the decisions that individuals and firms make about the allocation of resources and the prices at which goods and services are exchanged. In other words, microeconomics attempts to understand human decision-making and resource allocation.
Microeconomics does not try to answer or explain the forces that inevitably occur in the marketplace, but rather tries to explain what happens when certain conditions change. Much of the microeconomic information comes from the financial statements of individual companies. Microeconomics encompasses a number of basic principles, including the following
Demand, supply, and equilibrium
Prices are determined by the laws of supply and demand in competitive markets. In addition, suppliers offer the same price that consumers demand, thus creating an economic equilibrium.
Production Theory
This principle refers to the method of creation or production of goods and services
Cost of Production
According to this theory, the price of all goods and services is determined by the cost of the resources used to produce them.
Labor Economics
This principle relates to employees and employers and aims to understand the level of wages, employment, and income. The rules of microeconomics consist of a compatible set of laws and theories and are not subject to empirical study.
General economics
Macroeconomics is the study of the actions of a country and how its policies affect the economy as a whole. It is also a top-down approach because it focuses on all sectors and the economy as a whole, not just individuals and companies. Macroeconomics also tries to answer many questions, such as "What should the inflation rate be?" and "What determines economic growth?
Macroeconomics also studies macroeconomic phenomena such as gross domestic product (GDP) and how it is affected by changes in the unemployment rate, national income, growth rate, and price level. Gross Unemployment Rate (GDP)
Macroeconomics focuses on the sum of the interdependencies of the formal economy. Therefore, governments and their agencies rely on macroeconomics to formulate and successfully implement economic and fiscal policies. Macroeconomics is rich in concrete investment opportunities.
Instead, it is often said that John Maynard Keynes, the founder of macroeconomics, began to study a broader range of phenomena using money as an indicator, and while some economists support his theories, many others disagree with the way he explained his research.
The difference between microeconomics and macroeconomics
The Difference Between Macroeconomics and Microeconomics For individual investors, it may be better to focus on microeconomics rather than macroeconomics. While fundamental and traditional investors may disagree with technical investors on the proper role of economic analysis, microeconomics may have a greater impact on individual investments.
Warren Buffett says macroeconomic forecasts don't influence his investment decisions when asked how he and his partner Charlie Munger choose their investments Warren Buffett says macroeconomic forecasts don't influence his investment decisions when asked how he and his partner Charlie Munger choose their investments, says "Charlie and I are not concerned with the macroeconomic outlook. Or at the firm, because Buffett also called macroeconomic rules an interesting book.
Another very successful investor, John Templeton, also had the same view of macroeconomics. Templeton told Forbes in 1978, "I've never asked myself if the market will go up or down because I don't know. Because I don't know, and I don't care." However, I do look at stocks in different countries and ask myself, "Where are they cheap compared to what I think they're worth?" I ask myself."
Types of Goods in Microeconomics
Tangible and intangible goods
There are two types of goods: tangible and intangible. Tangible goods, for example, are things that can be seen, touched, and moved from one place to another.
Cars
Shoes
Clothing
Machinery
Buildings
Wheat
On the other hand, intangibles have no shape or weight and cannot be seen, touched, or moved, so all types of services are considered intangibles, like services
Medical services
Technical services
Agency services
Services of lawyers
Services of lecturers
The common feature of both tangible and intangible goods is that they have value and satisfy human needs.
Intermediate goods
Intermediate goods are goods that are sold from one company to another for resale or for further production of those intermediate goods. They are disposable goods of the producer that are processed to become final goods. Intermediate goods are also referred to as input goods. For example, cotton is sold from the field to a spinning mill, where it is processed. After leaving the spinning mill, the yarn is sold to a textile mill, where it is processed into a new product, textiles. The fabric is then sold from the mill to traders, who sell it as the final product.
Final product
Final products, on the other hand, are goods that are not sold for resale or further production, but are sold for personal consumption or investment in final products. Commercial and industrial enterprises are intermediate goods because they are used for further production.
On the other hand, water sold to private households is considered a final good because it is used for personal consumption. Similarly, postal services sold to commercial households are intermediate goods, while those provided to households are final goods. Therefore, the services provided by government agencies and non-profit organizations, which these companies and organizations purchase from businesses, are intermediate goods because they are used to provide services to final consumers, and should be classified as final goods according to the definition of intermediate goods.
When the government purchases raw materials such as cement and steel for the construction of roads and bridges, consumers use the services of the roads and bridges, which are final goods. The distinction between intermediate goods and final goods is important when calculating national income, especially when calculating national income using the product or value-added method.
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