Q.
a) Economics is traditionally divided into two main areas i.e. Micro economics and Macro economics. Explain.
b) Elaborate the meaning of opportunity cost with examples.
c) Illustrate in diagrammatic form, how prices are settled in a competitive market.
d) Discuss the basic economic problems in the built environment.
(4 marks each, 2011 Q1)
A.
a) Micro and Macro economics are the two side of the same coin. In a nut shell, economics is the study of how the society manages its scarce resources*. Hence, the are many perspectives of how to approach this studies. For micro economics, it is the perspective from households and individuals interacting with factors affecting individuals over this scarce resources.
Definition of microeconomics:
Is the study of individual decision-making by individuals and firms.
(Myers, Danny (2008) Construction Economics A New Approach. 2nd Ed. Faylor & Francis. Page 16)
For macro economics, it is from the perspective of a government or a region interacting with factors that can affect the economic conditions in a national or global scale.
Definition of macroeconomics:
Is the study of economy-wide phenomena resulting from group decision-making in entire markets. As such, it deals with the economy as a whole.
(Myers, Danny (2008) Construction Economics A New Approach. 2nd Ed. Faylor & Francis. Page 16)
And, the approaches have the more detailed view with micro economics as to how a man on a street were to response to increase in price of petrol and his livelihood. In the same context, a more broader view of a country having to cope with increase unemployment due to petrol price hike and hence retrenchment of redundant workers, in a macro econimic view.
* Definition from Mankiw, N. Gregory. 2012.Principles of Economics, South-Western Cengage Learning. Page 4.
b) Opportunity Cost.