Macro vs. Micro

Lesson objectives• Define key terms in the field of business economics• Display understanding of the use of graphical tools as

representations of macroeconomic and microeconomic principles

• Identify the differences and similarities between macroeconomics and microeconomics

• Describe why business economics is an important field of study

Key Vocabulary• Economics policies• Economics• Free enterprise economy• Households• Macroeconomics• Market economy • Microeconomics• Need• Resources• Standard of living• Want

How do Businesses make choices?• Economics is the study of how people and organizations make

choices in conditions of scarcity• Individuals and households make choices in order to make the

most out of their limited resources to meet their needs and wants

• Businesses likewise make choices as they convert limited resources into goods and services to meet our needs and wants, thereby maximizing their profit

How do Businesses Make Choices?• How does a company decide what to make?• The average price of a Big Mac is $4.80.• What does it cost to produce?• Who buys it?• Is this a good price?• For whom?

Price Yes/no For Whom$4.80

$6.00

$2.50

How do Businesses Make Choices?• All of these business questions are just as relevant to the

economist, whose primary area of study is how people, organizations, and societies make choices

The Market Economy• Get into pairs and discuss the following:• Who makes decisions about whether or not McDonald’s is going

to sell Big Macs?• Who decides what price to charge for them?• Who determines how much to pay McDonald’s employees?• What goals is McDonald’s working toward when it makes these

decisions?

The Market Economy• A market economy is built upon two key players—consumers

and producers. The interaction between these two key players answers the first two questions posed.

• Another two key players in the market economy—businesses and individuals (as employees or prospective employees), and the interaction between them—answers the third question.

• Profit is created by providing products that consumers want to buy is the answer to the final question.

Choices and Limited Resources• Presentation

Definition of Macroeconomics• Macroeconomics is an area of study that:• seeks to determine the aggregate (total) effect of interaction

between all buyers and sellers in a market by measuring:1. gross domestic product (GDP): the total amount of goods and

services a country (the United States, for example) produces in a year.

2. rate of inflation: how much prices go up in a given amount of time.

3. unemployment rate4. fiscal policy: where and how much money the government

spends in the economy and takes in through taxes. 5. monetary policy: how much money is in circulation in the

economy (this is referred to as monetary policy).

Definition of Microeconomics• Microeconomics is an area of study that:• seeks to determine how individuals and businesses make

decisions and the consequences of these decisions by measuring:1. the impact of supply and demand on a business.2. the costs and benefits of individual and business consumption

and production and pricing decisions.3. the effects of competition.

Definitions of Micro and Macro economics• Download- Reading: Microeconomics Explained• Download- Reading: Macroeconomics Explained• Highlight or underline key terms and concepts

Examples of Macro-economics• Today, you are going to research current macro economic

events. • Your goal is to identify 5 current events (everyone at your

table must have DIFFERENT events) that are related to macro economics.

• First summarize the article (who, what, when, where, why, or how)

• Next describe how it fits into the macroeconomic picture. • Last attach a link to the article online• Submit to the website.

Examples of Microeconomics• Today, you are going to research current micro economic

events. • Your goal is to identify 5 current events (everyone at your

table must have DIFFERENT events) that are related to micro economics.

• First summarize the article (who, what, when, where, why, or how)

• Next describe how it fits into the microeconomic picture. • Last attach a link to the article online• Submit to the website.

Venn Diagram• Download- Venn Diagram: Macroeconomics vs.

Microeconomics• Think about how different players in a market economy might be

more or less impacted by what each field covers• Turn into dropbox

Compare and Contrast• How would you incorporate the terms:• Business• Individuals• Government• Non-profit agencies

• Indicate the importance to or the impact each term has the given category

• Why would governments and businesses be more concerned with macroeconomics than individuals?

• Why would businesses and individuals be more concerned with microeconomics than government?

The Power of Graphs• Download- Assignment: The Power of Graphs• Which graph gets the point together and why?• Because economic information is primarily numbers, it lends

itself to graphic representation.• Both economists and businesspeople love graphs because

they get a lot of information across in a concise and clear way

The Power of Graphs• Create a nonlinguistic representation of the macroeconomic

issue of national debt• Be sure to use correct spacing and keep things to scale

Big Mac vs. the Whopper• What would happen to Big Mac sales if Burger King increased

the price of the Whopper to $5? Cut the price to 50¢?

Enrichment• Watch the 20-minute “Story of Stuff” online at

http://www.storyofstuff.com/ and then write two short responses. • The first should be about how the video relates to

microeconomics. • The second should be about how it relates to macroeconomics.

Cross-Curricular Integration• Research the command economy system and to complete a

Venn diagram comparing it with a market economy.