Answer to Question #189134 in Microeconomics for Rexford Obour

Question

Explain how microeconomics differs from macroeconomics. Which of the following

headlines, taken from the various issues of The Daily Graphic, deal with microeconomics:

a. “Nestle Ghana posted a 18% increase in sales”

b. “GRIDCO plans to slash more jobs”

c. “Ghana’s Output Grew by 5.8%”

d. “Housing starts soared 10% in September”

e. “Ghana to Breach key Deficit Target it helped to create”

Explain each issue why it is a microeconomic issue

5.B Justina owns the Just’s Sobolo Store. She charges GHS10 per bottle for herhandmade sobolo. You, the economist calculated the elasticity of demand forsobolo in her town to be 2.5. If she wants to increase her total revenue, what advice willyou give her and why? Be able to explain your answer.

Answer 1

a) Microeconomics: This is a firm-specific news report that mentions a particular firm's revenue figures. It isn't a problem that affects the whole economy.

b) Microeconomics: This is a decision made by a single company to slash jobs. This is unlikely to have a direct impact on the country's unemployment rate.

c) Macroeconomics: This news item discusses the country's overall production (GDP).

BA product with an elasticity of 2.5 is considered highly elastic.

Where the elasticity of a material is greater than one:

A reduction in the product's price would result in a rise in sales.