Macroeconomics and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. The field of study is vast; so here is a brief summary of what each covers. Microeconomics is generally the study of individuals and business decisions, while macroeconomics looks at higher up country and government decisions.
Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize its production and capacity, so that it could lower prices and better compete in its industry. (Find out more about microeconomics in How does government policy impact microeconomics?
Microeconomics' rules flow from a set of compatible laws and theorems, rather than beginning with empirical study.
Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole, not just of specific companies, but entire industries and economies. It looks at economy-wide phenomena, such as Gross Domestic Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by the unemployment rate. (To keep reading on this subject, see Macroeconomic Analysis.)
John Maynard Keynes is often credited with founding macroeconomics, when he initiated the use of monetary aggregates to study broad phenomena. Some economists reject his theory and many of those who use it disagree on how to interpret it.
Micro and Macro
While these two studies of economics appear to be different, they are actually interdependent and complement one another since there are many overlapping issues between the two fields. For example, increased inflation (macro effect) would cause the price of raw materials to increase for companies and in turn affect the end product's price charged to the public.
Microeconomics takes what is referred to as a bottoms-up approach to analyzing the economy while macroeconomics takes a top-down approach. In other words, microeconomics tries to understand human choices and resource allocation, while macroeconomics tries to answer such questions as "What should the rate of inflation be?" or "What stimulates economic growth?"
Regardless, both micro- and macroeconomics provide fundamental tools for any finance professional and should be studied together in order to fully understand how companies operate and earn revenues and thus, how an entire economy is managed and sustained.
What Should Individual Investors Look At?
Individual investors are probably better off focusing on microeconomics than macroeconomics. There may be some disagreement between fundamental (particularly value) investors and technical investors about the proper role of economic analysis, but it is more likely that microeconomics will affect an individual investment proposal.
Warren Buffetthas famously stated that macroeconomic forecasts don't influence his investing decisions. When asked about how he and Charlie Munger, his business partner, choose investments, Buffett responded, "Charlie and I don't pay attention to macro forecasts. We've worked together for 50+ years, and I can't think of a time when they influenced a decision about stock or a company." Buffett has also referred to macroeconomic literature as "the funny papers."
John Templeton, another famously successful value investor, shared a similar sentiment. "I never ask if the market is going to go up or down, because I don't know. It doesn't matter. I search nation after nation for stocks, asking: 'where is the one that is lowest priced in relation to what I believe it's worth?'" said Templeton.
The Divide Between Microeconomics and Macroeconomics
Microeconomics concerns itself with the small details that make a difference when evaluating individual companies. This includes production costs and market prices for goods and services. A lot of microeconomic information can be gleaned from the financial statements.
Macroeconomics focuses on aggregates and econometric correlations. Investors of mutual funds or interest rate-sensitive securities should keep an eye toward monetary and fiscal policy. Outside of a few meaningful and measurable impacts, macroeconomics doesn't offer much for specific investments.
Moreover, economists generally agree on the principles of microeconomics. As the International Monetary Fund (IMF) website states, "There are no competing schools of thought in microeconomics." This is not true with macroeconomics. Macroeconomic forecasting has a very poor track record, and the accepted version of macroeconomics has changed several times since its inception.
If you are interested in learning more about economics, take a look at What is "marginalism" in microeconomics and why is it important?and What kinds of topics does microeconomics cover?
Microeconomics Paper Topics
Finding the right topic to write a paper on is one of the most important stages of the writing process. Choose the right one, and you will make life so much easier for yourself; choose the wrong one, and it’ll be three times as hard to write it.
That’s why it is crucial to invest sufficient time in selecting the right topic. The time you spend doing it will pay back in the time and effort saved during the actual writing.
In this blog post, we have compiled a list of possible topics you could choose to write a paper in microeconomics. Some are rather narrow, others are broader. The common thing is that they will not pose any additional difficulties in writing and there are plenty of sources to get information from.
Key areas of research
As a more developed science than macroeconomics, microeconomics studies the economic tendencies, predicts what will happen when individuals make certain buying decisions, and how it will impact the distribution of resources. At that microeconomics doesn’t explain what should happen on the market, but only what to expect when certain conditions change.
The study of microeconomics includes the following key areas that one can focus on when writing a paper:
- Demand, supply, and their balance
- Elasticity – the ratio of responsiveness of one variable to the change of another variable
- Consumer demand theory – the way consumers can find a balance between purchasing needs and costs
- The theory of production – the study of how inputs are converted into outputs
- Costs of production
- Perfect competition
- Monopoly – the existence of a single supplier for a particular commodity
- Oligopoly – a form of market in which it is dominated by a small number of sellers
- Market structure and market systems
- Game theory
- Labor economics
- Welfare economics
- Economics of information
- Opportunity cost
Examples of more specific topics you can use for your paper
Supply and demand:
- How supply and demand affect pricing
- How supply and demand are affected by the labor market
- Distinct types of market structures and their effect on supply
Nature and ecology:
- The impact of seasonal fluctuations on the economy
- Demand and supply for clean energy
- How natural conditions affect the economy
- The influence of ecology on the choice of industry location
- The profitability of changing the location to one with better ecology
- The correlation between modern ecological problems and the economy
- How companies treat ecology under market and planned economies
- Assimilation potential of a certain area
- Fighting pollution and its microeconomic impact
- Decreasing environmental influences of a small business
- The characteristics of private health care centers
- The correlation between healthcare profits and taxation
Business, SMB, and manufacturing
- The difficulties of starting a business in the current market conditions
- Diminishing returns
- Improving profitability of a small store
- How local manufacturing affects the society
- Purchasing local produce and its effect on the economy
- Elements of a successful business
- Creating a positive work place and its importance for a successful business
- How can a small business survive an economic crisis?
- The competition between small and big companies
- A case study of a company that was forced to shut down
- The longevity of companies in the ever-changing market
- Local customer trends
- The benefits of a no-sale policy
- The effects of a recession on a certain industry
- How to expand a business without losses or risks
- What makes a strong leader in business
- Preventing bankruptcy of a small business
- The benefits and future of crowdfunding
Social media, PR, and advertising
- The effect of advertising on purchasing decisions
- The odds of success when living through a quality-related scandal
- The role of social media marketing in stimulating supply
Goods, pricing and purchasing power
- The effect of the purchasing ability of consumers on the pricing system
- A Veblen good – the product purchased for the pride of owning it in addition to its value
- Manipulation of the prices for oil and gas by cartels
- Prices versus salary – will the raise of the minimum wages affect prices?
These are but a few ideas of microeconomic paper topics, which means this list is far from complete. We encourage you to look for other ideas that will help your paper stand out.
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