1) With examples, give 5 reasons why the study of microeconomics is important.
2) Define “ceteris paribus”. Explain why the device of ceteris paribus is so important in economics.
Prepared for: Prof. Madya Habibah Lehar
Prepared by: Nik Syahirah binti Nik Muhammad
1) The Importance to study Microeconomics.
Microeconomics as has been stated by those who have studied Latin know that the prefix “micro-“ means “small,” so it shouldn’t be surprising that microeconomics is the study of small economic units (Jody Beggs). As referred to the book on Understanding Economics Third Edition, microeconomics is a study in economic activities and decision-making of an individual like a seller, buyer, or consumer, firm or producer or a government unit or level. This study is concerned about the demand and supply of particular goods and services and resources such as cars, clothes and computers. At the same time, it can determine the aspects which influence individual economic choices and how the choices from various decision makers are organized by markets. To further the understanding of microeconomics, here are a few importance of microeconomics study. First of all, it leads to get a better understanding the working of economy. This study totally gives bird’s eye view of the economic world as it gives understanding of economic works as a whole. This study covers each single aspect which is related to the economic issues. It helps in understanding how the macroeconomic variables behave in aggregate. For example, study of the national income, aggregate output, employment and national expenditure is very essential to understand the working of the economy. Second, the microeconomics is totally important in consumer decision-making process. Business draws upon microeconomic data to make several of critical choices, any one of which could mean the success or failure of their business. It...