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Which of the following topics is more likely to be studied by microeconomists than by macroeconomists?
-the effect of a cigarette tax on the quantity of cigarettes sold
- a consumer's optimal choice of a flat-screen tv
-the government's optimal spending level
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Both of the first two of these would be more likely to be studied by microeconomists than by macroeconomists.
Microeconomics looks at issues having to do with single consumers, single firms, single industries, and other such actors. This can be contrasted with macroeconomics, which looks at things that affect an entire economy.
From this, we can see that both of the first two are microeconomic issues. They both have to do with things that are far below the level of the economy as a whole. One has to do with the cigarette industry only. The other has to do with one consumer's choice. This is in contrast to the last topic, which has to do with the macroeconomic topic of the impact of government spending on the entire economy.
Microeconomics concerns itself with the allocation of resources as well as the distribution of goods. The allocation of resources and the distribution of goods ties in with pricing as well, and this is all part of a free market economy. Therefore, microeconomists concern themselves with studying the market economy: goods, services, prices, and distribution issues in specific economies. Microeconomics deals with sub-levels of the overall general economy.
Accordingly, the effect of a cigarette tax on the quantity of cigarettes sold would be studied by microeconomists rather than macroeconomists because this tax would affect price, consumption patterns by consumers, distribution based on demand for the product, as well as where it was most in demand.
A consumer's optimal choice of a flat-screen TV would also be studied by microeconomists rather than macroeconomists because, again, this involves the market economy. It involves the allocation and distribution of various types of flat-screen TV’s at different price points, and promoted in different regions, each region with its own economic idiosyncrasies.
The government’s optimal spending level would be studied by macroeconomists rather than microeconomists because this spending level is not a market economy issue that has to take in to account consumer wants and needs, supply and demand, pricing, product distribution, and such. The government’s spending level is something that affects a nation’s economy as a whole.
Macroeconomics concerns itself with the study of how the total economy works. It does not concern itself with what happens in the market economy of people and businesses and the choices they make. Macroeconomics looks at the big picture. Microeconomics narrows its focus and looks at the market economy and how issues affect consumer and business behavior.
Macroeconomics studies monetary and fiscal policy. Policies, programs, and laws instituted because of monetary or fiscal policy affect total demand in a nation’s economy. These are broad-based policies that affect the total economy.
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