Think about the following news items. Which items involve a microeconomic issue and which involve a macroeconomic issue? A. Will proposed tobacco tax hikes reduce smoking? B. More police, managed more effectively, can reduce crime. C. Satisfaction with standard of living greater now than in 2000. D. Pay to rise for millions as minimum wage rises. A. micro; B. micro; C. macro; D. micro
The correct answer and explanation is:
The correct categorization of the news items is as follows:
A. microeconomic issue
B. microeconomic issue
C. macroeconomic issue
D. microeconomic issue
Explanation:
- A. Will proposed tobacco tax hikes reduce smoking?
This is a microeconomic issue because it pertains to individual behavior (consumers’ decision to smoke) and the effect of government intervention (tax hikes) on the demand for a specific product (tobacco). Microeconomics deals with the choices and behaviors of individual consumers and firms in specific markets. - B. More police, managed more effectively, can reduce crime.
This is a microeconomic issue because it involves the allocation of resources (police force) within a specific local area or jurisdiction and the decision-making process regarding how to reduce crime. It focuses on the behavior of individuals (police officers and citizens) within a specific context. - C. Satisfaction with standard of living greater now than in 2000.
This is a macroeconomic issue because it involves a broad measure of economic welfare across the entire economy. Macroeconomics deals with the overall performance of the economy, including measures like national income, employment, inflation, and the standard of living. This statement evaluates the general well-being of society over time. - D. Pay to rise for millions as minimum wage rises.
This is a microeconomic issue because it focuses on the effect of a policy change (minimum wage increase) on specific individuals (workers) and firms (employers) in local labor markets. It looks at individual wages and their economic impact rather than the overall economy.
In summary, microeconomics deals with the choices and behaviors at the individual or firm level, while macroeconomics focuses on the broader economy as a whole.