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B.PRAHALATHAN
DEPARTMENT OF COMMERCE
UNIVERSITY OF JAFFNA
SRILANKA
Micro Economics
Macro Economics.
Explains the
working of the markets for
individual commodities
Uses
/
Importance
Microeconomics
Advantages
of
1.
Minimization of Cost
optimum
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Demand Forecasting
The theory of Demand and Demand analysis, elasticity
of demand etc help in understanding and predicting
demand of a product.
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Cardinal utility
Ordinal utility
Social choice theory
marginal rates of substitution
marginal rate of transformation
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Macroeconomics
Macro economic studies the economic problems at
aggregate - national level and international levels.
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total employment,
total output,
total consumption,
total savings,
total investment,
national income,
aggregate demand,
aggregate supply,
general price level,
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Inflation
Interest rates
Environmental impacts
Government intervention
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DISTRIBUTION OF FACTORS OF
PRODUCTION
Distribution
refers to the way total output,
income,
or wealth is distributed among individuals or
among the factors of production (such as labour,
land, and capital)
ME also deals with various factors of production
and their relative share in the total production or
total national income
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Macroeconomic Theories
The main bodies of macroeconomic theories are,
Income Determination
Consumption
Investment
Employment
Price Level Determination
Product and Money Market Equilibrium
Exchange Rate
Balance of Payments
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In Final Word..
Importance of Macroeconomics
Importance of aggregate variables.
useful to understand the functioning of complicated
economic system.
Why complicated?
Since macroeconomic problems are related to the
aggregate variables at the same time they are
interrelated with each other.
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Importance of Macroeconomics
Primary objectives
Secondary objectives
Full production
High standard of living
Reduction in inequalities
Social Justice
Control of monopoly
Economic freedom
Equilibrium in balance of payments
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Output Gap
The output gap is a measure of the difference between actual
output (Y) and potential output (Yf).
The output gap = Y- Yf
What is potential output?
Potential output
Potential output is the maximum amount of goods and
services an economy can turn out when it is most efficient or
at its at full capacity. OR
Total gross domestic product (GDP) that could be produced by
an economy if all its resources were fully employed.
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