What real-world examples do you have of microeconomic and macroeconomic
#7 Other Things Equal Assumption ( Professor responding to my previous post)
Keke and All — Keke discussed microeconomics and macroeconomics. Likewise, a previous student said macroeconomics is a “zooming out” from microeconomics. Please note: The distinction between macroeconomics and microeconomics is explained by the “all other things equal assumption.”
According to Colander (2013), the author of a textbook previously used in this class:
In supply/demand analysis [in microeconomics], other things are assumed constant. If other things change, then one cannot directly apply supply/demand analysis. Sometimes supply and demand are interconnected, making it impossible to hold other things constant. (p. 94)
For example, if the actions of a “player” in the our economic “game” affect the other players in a substantive way, then these actions would be in the realm of macroeconomics, that is, everything else would not be equal. An example of this would be the U.S. government–a major player in our economic game. If the U.S. government ran a budget deficit in the 100’s of billions of dollars, which it currently is, this deficit certainly affects other players in the economy in a big way, especially defense contractors. It also affects the overall level of unemployment (reduces it), inflation (boosts it), and GDP (boosts it).
In contrast, an example of a microeconomic player would be the Sir Speedy print shop in Saranac Lake (where I live). This Sir Speedy employs three or four people, and its actions have very little effect on other players in our economic game. For example, if this Sir Speedy closed, no one except its employees and owners would feel much of an impact, that is, the “all other things equal assumption” would apply because “all other” economic players would be unaffected.
This macro/micro distinction is also a subjective issue because, in many cases, it is difficult to distinguish if the actions of an economic player affect the economic game and other players in a substantive way. This is especially so when we discuss particular industries, as you asked about below. For example, actions of the overall automobile might be in the realm of macroeconomics, especially if the auto industry laid off a large number of workers in a short period of time because this action could affect the overall economy. On the other hand, if your local car dealer closed, they would not have an effect on the overall economy.
Class — What real-world examples do you have of microeconomic and macroeconomic “players?”
Colander, D.C. (2013). Economics,9e (9th ed.). New York, NY: McGraw-Hill Irwin.
#8 Minimum Wage: A price floor ( Professor Post)
Hello, Everyone – The Week 1 assignment asks you “how do price controls affect supply, demand, and equilibrium prices?” The minimum wage, which has been in the news headlines quite a bit recently, is a price control; it is a price floor. According to Mankiw (2015), a price floor:
is a legal minimum on the price at which a good can be sold (p. 112)
The U.S. Department of Labor has an interactive map of minimum wages by state at www.dol.gov/whd/minwage/america.htm.
Minimum Wage Laws in the States. Use the legend on the left to highlight different MW categories, and click on any state to learn about applicable minimum wage laws.
Class – What is the minimum wage in your state ?(7.25 per hour in VA) Is it higher or lower than the Federal minimum wage? Should the minimum wage be raised to promote more income equality Who benefits from an increase in the minimum wage? Who is harmed?
Mankiw, N.G. (2015). Principles of microeconomics: a guided tour,7e (7th ed.). Stamford, CT: Cengage Learning.
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