Definition of economicIt is saying economicis the art but in the modern society it is named social science. Considering ofeconomic they will think about how cost and resources are efficient for humanbeing’s unlimited wants.There are microeconomic and macro economic Micro economic concernthe behavior of individuals and firmdecision making. Eg. Individuals, firms and household manage money how to spendefficiently than organization and internal level.Micro economic issuesChoices – All society have unlimited wants and if youwant to choose something, you are going to face opportunity cost.
Becauseresources are limited in production (labor, land, machine etc.)Concept of opportunity cost – It is referred alternative cost of resource.for eg. You spend the time at bar afterfinishing job, you cannot be havingdinner with your family at home and you have no time to watch TV somethingelse.Rational economicdecision makingIndividual always makelogical decision which support people satisfaction and their highestself-interest.It is consideredmarginal cost and marginal benefits.Marginal cost When production madeone additional unit, the total cost of production is incurred for one more unitof good and service.Marginal benefitMarginal benefit isadditional benefit caused by consumption of one additional unit of good andservice .
In addition what is thedifferent between marginal cost and marginal benefit.When business areplanning to produce good or services to customer , They focus on how much it ischarged for incremental costs and they expect how much they get benefits.Microeconomic objectiveThere are efficiencyand equityEfficiencyIt is important for abusiness to have efficiency and effectiveness.Every business maintainstandard, goal and profitability. .
Eg. Business expectlowest prices in production or services but good to be in possible goodquality. EquityEquity means which everyonecomes from different field. Therefore they have different background, idea,culture and ethic but they should have same opportunity and fairness where theyare working place.(Glen, 2013)MacroEconomic Issues Macroeconomics mentions to the ‘big picture’study of economics, so looking at concepts like industry, country, or globaleconomic factors. Macroeconomics contains studying concepts such as a country’s Gross DomesticProduct (GDP), unemployment rates, growth rate, cyclical fluctuations and how all theseconcepts has relationship with each other.
(i) Relationship with growth and inflationEconomicgrowth is explained by Endogenous GrowthTheory that is related to the matters ofproduction for example; economies ofscale, encouraging technologicalchanging and increasing in population.In endogenous growth theory, the growth rate has rely on one variable: forexample. When it face inflation , it will affect decreasing on the rate of return that will reduce aggregation of capital and decline the growth rate.(Atish Ghosh and Steven Phillips, 1998)The authorsstate which a relationship occurs between inflation and growth, it is notlikely to be a simple one. The bivariate relationship may not be linear; andthe correlation between inflation/disinflation and growth maybe quite differentfrom the steady-state inflation-growth relationship.
Ghosh and Phillips arguefurther, that in a multivariate case, the relationship becomes even morecomplicated. The inclusion of other determinants of growth reduces the apparenteffect of growth, for a number of reasons. These include amongst others, theidea that some of the other determinants may be functions of inflationthemselves.
In this paper, they attempt to address these various methodologicalproblems in an attempt to examine the relationship between inflation,disinflation and output growth.Unemploymentin macroeconomic mention There are five activity of circular flow of income.IndividualBusinessFinancialinstitutaionGovernmentInternationaltradeIndividualsoperate business there will appear income and expenditure on good and services.
When they earn profitable amount they have saving money and money go tofinancial institution and they can invest more in business and they also haveto pay taxes from their profit to the government. It is going to occur moneycirculation and money from government flows to the business as expenditure. Ifindividual own import and export business, it will happen as internationalflow..Individuals ? Thissector is combined firms and household in economy. They are also productive resources and the consumers is necessary included . ? Individuals deliver thesource of operation such as skill labors and technologies to the businesses, that they can produce goods and services. On the other hand theseresources can happen individual income , interest and profitable thing in the businesses.
When firms and households arestarting the business, production of good , selling and distribution productwill be considering according to economic. (except financial services). ? Their process is involvedpurchasing raw materials for production and consuming material to be finished good and it can be sold in themarket . ? Individualsand businesses are reliant each other . One more important consideration is financial institutions .We cannot runproperly even small business if we don’t have enough financial situation.
So borrowing and lending of money are consisted of those institutions. For individuals and firms financialinstitutions are the most essential. A command economy is controlled by government. It means they restricted the unit of product anddistribution of product as well.
In this command economy private sector cannotsurvive. Recruitment and assignment of duties for labors is governed by the government. Therewill happen advantages and dis advantages in command economy type . Inequalityand unemployment are happened in command economy for the incentive and it is advantages. Wages and salary are sameall type of employees who they are hard working or not. But as a disadvantagesemployees are mixed with skill an unskill labors and no competition within eachother