Introduction To Macroeconomics: Nature And Scope

Q1: What is microeconomics? Bring out its significance and limitations.

ANS: *INTRODUCTION:-

– Economics is the study of allocation of scarce resources among competing ends which have alternative uses.

– Economics is broadly divided into two parts:

^ Microeconomics.

^ Macroeconomics

– Macro-economics is that branch of economic analysis that studies the behaviour of aggregates i.e. of all the units combined together.

*MEANING:-

– Macroeconomics is the study of aggregates covering the entire economy. Thus, macro-economics is related to study of aggregates like total employment, total output, total consumption, total savings, total investment, national income, aggregate demand, aggregate supply, general price level, etc.

– Since macro-economics deals with aggregates, it is also known as theory of income and employment or income analysis.

*NATURE:-

– Macro-economics studies the aggregates of the entire economy. The nature of macro-economics can be understood with the help of the following aspects:

i) DETERMINATION OF NATIONAL INCOME AND EMPLOYMENT:

– Macro-economics deals with aggregate demand and aggregate supply that determines the equilibrium level of income and employment in the economy.

– The level of aggregate demand determines the level of income and employment.

– Macroeconomics also deals with the problem of unemployment due to lack of aggregate demand. Moreover, it studies the economic fluctuations and business cycles.

ii) DETERMINATION OF GENERAL PRICE LEVEL:

– Macroeconomics studies the general level of price in an economy.

– It also studies the problem of inflation and deflation.

iii) ECONOMIC GROWTH AND DEVELOPMENT:

– Macroeconomics deals with economic growth and development.

– It studies various factors that contribute to economic growth and development.

vi) DISTRIBUTION OF FACTORS OF PRODUCTION:

– Macroeconomics also deals with various factors of production and their relative share in the total production or total national income

*SCOPE AND SIGNIFICANCE:

– Macroeconomics occupies a significant place in economic analysis and has a lot of theoretical and practical importance.

– The importance of macro-economics can be understood from the following points:

i) POLICY FORMULATION:

– Macroeconomics plays a very important role in formulating economic policies. Since Government intervention in economic affairs is indispensable in the present economic scenario, the knowledge of aggregates is of great importance in the framing as well as the implementation of economic policies of the nation.

ii) BASIS FOR MICROSTUDY:

– Macroeconomics provides the basis for microeconomic analysis as the study of aggregates helps to understand and verify the behaviours of individual units.

iii) MULTI-DIMENSIONAL STUDY:

– Macroeconomics has a very wide scope and covers multi-dimensional aspects like population, employment, income, production, distribution, consumption, inflation, etc.

– This is very helpful in controlling fluctuations in these factors.

vi) NATIONAL INCOME:

– Macroeconomics studies national income accounting which helps to understand the distribution of income among different groups of people. It is also instrumental in forecasting the level of economic activity.

v) SPECIAL GROWTH MODELS:

– Macroeconomics has been useful in developing special growth models. These growth models are applied for economic development because the economics of growth is, in essence, the study of macroeconomics.

vi) MONETARY PROBLEMS:

– Macroeconomics has special significance in studying monetary problems that adversely affect the economy.

– In fact, macroeconomics focuses on the problems of inflation and deflation and their solution by adopting monetary, fiscal and direct control measures.

*LIMITATION:

– Though macro-economics is essential in economic analysis and has great practical and theoretical importance, it suffers from certain drawbacks or limitation. These are:

i) UNREALISTIC ASSUMPTIONS:

– Macroeconomics assumes that the aggregates are homogeneous. Such an assumption is, however, unrealistic.

ii) GENERAL ECONOMIC WELFARE:

– Macroeconomics deal with general welfare and disregards the welfare at individual levels though individual welfare forms an important part of economic study.

*CONCLUSION:

– In spite of its limitations, macroeconomics is of great practical importance and is widely used.

– It provides practical solution to economic problems.

– It is complementary to microeconomics and the study of both is vital for proper analysis of economic problems.

Relationship Economics by David Nour – Book Review

Title and Author: Relationship Economics by David Nour

Synopsis of Content:

David Nour revisits a common subject of books these days but with a different twist. He identifies the most important resource of a business (and arguably of a person) to be their relationships – who they know and the quality of their relationship with those they know.

Nour divides relationships into three categories: personal, functional and strategic. He suggests each type of relationship serves different functions and require different approaches to establish and to nourish.

He argues that relationships are the centric goals for business development whether we realize it or not. He also discusses how our relationships guide us in developing our leadership ability.

Nour applies Social Network Analysis (SNA) and several other scientific measurement approaches to identify the significance of relationships and to plan for them strategically. The book discusses how to develop relationships, such as those with customers, and how not to. Nour even provides a 30-60-90 day personal relationship plan to build and nurture relationships.

Nour’s book offers some unique and creative approaches to understanding the significance and power of relationships in our business and in our lives. While he protests that his book is not about using or exploiting people and relationships it is difficult to see how the business application aspects of his book and the strategic applications do not in fact teach one how to utilize relationships and their development to your advantage – a glossy way of saying he shows you how best to use them.

This book is worth the read. You will undoubtedly learn some valuable ideas about how to establish and grow relationships in the business world. It should be read however with a bit of caution – taken too far the ideas here could be exploitive and contrary to one’s personal integrity. In fairness to Nour, many people use far less strategic thinking to exploit their relationships – he does not advocate exploitation but the tools he teaches would seem to make it far easier to accomplish.

Readability/Writing Quality:

The book is quite readable. It is organized like most modern business books with many chapters, sub sections and application or example boxes. While the book has a logical flow it is sometimes difficult to remember what section you are in based on the content.

Notes on Author:

David Nour describes himself as a “social networking strategist”. He heads up his own consulting company called BeOne Now.

Three Great Ideas You Can Use:

1. The main reason networking does not work is that it lacks purpose, goals, is haphazard and reactive. Learning to plan networking with a definite purpose, a set of goals and a strategic plan makes it far more effective.

2. Teams should be selected and trained along the “relationship-centric” model; that is, using team members who possess and demonstrate the most relationship functional attributes.

3. To attract the most influential relationships you must build your relationship currency, what you have to offer to attract the relationships you seek; this currency includes: becoming more interesting by deepening your own horizons and interests, building a personal brand, and becoming known for your high value content.

Publication Information:

Relationship Economics by David Nour

Copyright 2008 by David Nour. Published by John Wiley & Sons, Inc.

Overall Rating for Book: Good

Designer Bags and Economics – Finding the Link

Wondering what economics and handbags have in common? There is a connection between any kind of luxury goods and the economy, and so it is with exquisite handbags. However, the question is how you can understand this tenuous connection without using big economic terms that only economists seem to understand?

Principle of demand and supply

A common principle in economics states that if there is more demand the supply will be less which will tend to make the product price go upwards. Similarly, if supply is more, the demand will go down which will result in the price going down.

Interestingly, even during the times of recession in America during 2008, the sales of luxury bags didn’t see a sharp slump and remained steady.

Let us first understand what the effect of a recession has on handbags:

  1. Designer houses start to focus more on usefulness than just on luxury. Louis Vuitton, for example, had a hot selling-product – a watch studded with so many diamonds that it became difficult to tell the time. But during the 2009 recession, more emphasis was laid on design than plain luxury. Similarly in handbags, leather makes a comeback and other materials take a backseat.
  2. Brands and designer houses go along with the psychological shift of the buyer. While before they might have emphasized their beautiful stores in marketing, a weak economy leads back to the basics – emphasizing that the design of the designer bag is impeccable.
  3. People start buying one statement piece instead of going in for a collection during the bad times. It helps them rationalize the spending in their head. ‘I am going to buy one classic Gucci’ sounds better than ‘I will buy one Prada for parties and a Louis Vuitton for the office’, even though that one item may cost more than several others combined.
  4. In Hong Kong, luxury handbags can be taken as collateral. Instead of the papers for your home or the keys to your car you can handover your collector handbag, and after assessment, you will be given a loan. Asia is one of the largest markets of such luxury goods, and Hong Kong is among the top consumers.
  5. Exquisite handbags are one of a kind, which means the market never faces complete collapse even when there is a falling economy. The supremely rich still keep on buying and though the middle class reduces its spending, it interest and buying does not stop.