Econ: Economics and Individual Decision Makers Essay

Submitted By time_raider
Words: 470
Pages: 2

What is...?: This is the first half of W&L's two-term introduction to economics. Microeconomics is the science of human behavior, with a focus on individual, "rational" decisions. Among many possible examples, economists build models to analyze how we use time, what and how much we consume, and why we do (or do not) vote. We extrapolate such analysis from individuals to include the behavior of firms (by treating them as individual decision makers), and the interaction of individuals in markets. Economists typically abstract from the dynamic complexities of the real world to focus on "equilibrium" prices and quantities, and on whether such equilibria are efficient and equitable.

In contrast, next term in macroeconomics we analyze the performance of a national economy. In "macro" we take up issues such as unemployment and inflation, government budgets and deficits, and international trade and finance, where it is in general not fruitful to model behavior as a simple function of individual decisions. While some "micro" tools and concepts carry over into macro, the flavor of the analysis is quite different. But that's for next term.

Focus: "Micro" is a science. In developing your understanding of micro, as in the hard sciences, we use a standard set of basic problems - exemplars - and formal tools (primarily graphs), all the while employing the peculiar jargon of the field. Of course some academic economists focus on refining economic theory and developing new tools; others confine themselves to the statistical testing of standard models. But most economists focus on policy, trying to prescribe what ought to be done, or predict what is likely to occur. We'll find many such examples as we go along. Above all, businesses find micro helpful in formulating corporate strategy, and in setting pricing and controlling costs. Moreover, compared to the public sector, the private sector pays well, and practitioners have a greater likelihood…