What is the Role of Microeconomics?

Microeconomics has a role in society as well as in the economy of a region. This field of study allows economists to determine not only the patterns of consumers, businesses, and other organizations that are spending money but also the factors that are affecting spending habits and production decisions. Microeconomics involves studying the concepts and ideas that establish supply and demand in a particular market and the way that consumers and businesses like prioritize their spending.

Essentially, the role of microeconomics is to determine how, when combined, small economic components are affecting the broader economy. Instead of looking at market indicators that represent a wide field of data, however, this type of study considers how individuals, households, or specific markets are responding to markets. Although this economic approach does not necessarily reveal or determine economic conditions, the process offers insight into the way that consumers and businesses like decide the value of a particular product or service. This is expressed in the amount of resources that either the consumer or business dedicates to an item.

Rather than tallying the way that consumers as a whole are responding to a particular product, for instance, microeconomics begins with the study of the extent of demand stemming from one single consumer. Once this demand has been determined, this study continues and expands to include a greater number of individuals in the assessment. Economists also study businesses to learn how these entities respond to different types of consumer demand and the ultimate effect on pricing.

A major role of microeconomics is to recognize the way that prices for goods and services are establishedin a given market. The process involves identifying the impactthat supply and demand have on the way that items are produced. When there is a disconnect between the amount of supply and the interest stemming from buyers, there is an inefficiency in the market. The application of microeconomics should ultimately reveal where and how the market imbalance occurred.

Also, the role of microeconomics reveals the way that buyers prioritize resources. This is because even when consumers possess an interest in buying particular service or product, these individuals are typically limited in the amount of resources available to them. Subsequently, the strategies involved with microeconomics could reveal the way that consumers prioritize resources and also offer insight on the way that individual buying decisions affect market competition. Written by Geri Terzo

Vocabulary Expansion

1. Make phrases by matching words from the left-hand column with words from the right-hand column. For e.g. spending habit

Spending	effect
Ultimate	habit
Single	product
Particular	consumer
Economic	demand
Consumer	approach

2. Make the following words have a negative meaning by adding a prefix.

Balance, connect, like, efficiency, available, interesting

3. Match the words and expressions on the left with the words of the same meaning on the right.

To affect	to set up
Conditions	to have an effect on
Consumer	assessment
Evaluation	customer
To react	terms
To establish	to respond to

Language Focus: Modal Verbs (Should)

Review the grammar rules: http://www.native-english.ru/grammar/modal-verb-should

Необходимость в виду какого-то субъективного мнения, совет	Kevin should invest his money. Кевину следует инвестировать свои деньги.
Предположение с оттенком уверенности	Youshould berunning out of stock. У Вас, наверное, заканчиваются запас.
Упрек, сожаление	He shouldn’t have exceeded the speed limit. Не стоило ему превышать скорость

Test 1

Choose the correct answer.

1. Which word completes the sentence:

The bill should have … by now

a. Arrive

b. Arrived

c. To arrive

2. Which sentence is correct?

a. I shouldn’t shouted at him.

b. I shouldn’t have shouted at him.

c. I shouldn’t to shouted at him.

3. Which word completes the sentence?

The traffic was really bad. We … left home during rush hour.

a. shouldn’t have

b. should have

c. should

4. Which sentence has a similar meaning?

I went to the supermarket on Saturday morning. It was very busy and I regret it now.

a. I should go to the supermarket on a Saturday morning.

b. I should have gone to the supermarket on a Saturday morning.

c. I shouldn’t have gone to the supermarket on a Saturday morning.

5. Which sentence means

I didn’t tell John about the meeting. I regret it now.

a. I shouldn’t have told John about the meeting.

b. I should tell John about the meeting.

c. I should have told John about the meeting.

bebris.ru/.../конструкция-ought-to-и-should-have-done-в-английском

www.englishgrammarsecrets.com/shouldhave

Supplementary Reading: Case

Study the case, analyze the situation of microeconomic failure and answer the following questions:

1. What problems did GM have in late 2008?

2. What contributed to the company’s bankruptcy in 2009?

3. What decisions should GM management have taken to avoid its failure?

Microeconomics in Action

In order to best understand how microeconomics applies to the real world, we'll go over the case of a car maker, General Motors. Once, General Motors was among America's most profitable companies and a colossus of the automobile industry.

Microeconomic Failure

By 2008, GM had fallen on hard times, the victim of a slumping U.S. and global economy and a series of microeconomic decisions that turned out to be wrong. Trouble at the microeconomic level began for General Motors several years before its problems worsened in late 2008. As Japanese automaker Toyota began steadily eating into GM's market share, GM did not meet its competition head-on.

Toyota made a cheaper car with better gas mileage that was of better overall quality, and was engineered for greater durability than its chief competitor, GM. Consumers naturally gravitated away from GM to Toyota and demand for the once-popular GM automobiles declined slowly and continually as Toyota and other Japanese cars won an ever-increasing share of the automobile market.

Bad Decision-Making

Although the general economy may also be responsible to some degree for GM's fall, which eventually led to its bankruptcy in 2009, several GM management decisions at the microeconomic level contributed to the problem.

First, prior to its bankruptcy, GM was selling eight different brands of cars – Buick, Cadillac, Chevrolet, GMC, Hummer, Pontiac, Saab and Saturn. The number of units manufactured for each of these brands represented too much output, a situation in which the marginal revenueis less than the marginal costs.

Second, as gasoline prices rose, spurred by rising oil prices, GM continued to build gas-guzzling SUVs and pick-up trucks, and failed to produce cars that kept pace with the high mileage-per-gallon vehicles produced by Toyota and other Japanese manufacturers. Despite the obvious decline in demand for automobiles that were not fuel-efficient, GM persisted in marketing them, reflecting a microeconomic decision of management that seemed to disregard data on consumer preferences.

Finally, in response to high consumer demand for fuel-efficient or alternative-energy vehicles, GM began developing hybrid vehicles, but only long after its competitors had brought them to the market.

GM's problems staggering debt and the costs of honoring contracts to provide pensions to its retirees and handsome health benefits and other costly benefits to its union-represented employees only contributed to its decline.

Too many microeconomic decisions at GM have apparently proved unsuccessful. The result was a bankruptcy filing for a firm that once made huge profits and reigned supreme over its industry.

Vocabulary Notes.

To fall on hard times –выпадать на период экономического кризиса

To compete head – on –вести конкуренцию во всеоружии

Output –общее количество произведенной продукции

Marginal revenue/marginal costs –предельная выручка/предельно-высокая себестоимость

To keep pace with the demand –удовлетворять спрос в достаточном количестве

To honor a contract –выполнять контракт

To reign supreme –превалировать, не иметь конкурентов

Over to You

1. Read and translate the following article in “The Economist” journal How an Economist Says "I love you"

http://www.economist.com/blogs/graphicdetail/2012/02/valentines-day

2. Analyze all graphs considering economic terminology,comment on them. http://www.investopedia.com/dictionary/#axzz23LNT6zIs, http://www.multitran.ru,http://www.macmillandictionary.com/open-dictionary/latestEntries.htm

3. Draw your own graph and describe it using the following expressions:

This graph shows you… A curve depicts …
If you look at this, you will see… I'd like you to look at this…
This chart illustrates the figures… This graph reflects…

For example: figure 2

What is the Role of Microeconomics? - student2.ru

Production possibilities frontier –предел производственных возможностей

A curve depicts all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.). The PPF assumes that all inputs are used efficiently

Related References:

http://www.slideshare.net/meerisild/describing- graphs http://www.eclecticenglish.com/applets/Graphs.html; hhttp://wordsteps.com/vocabulary/words/15136/WAYS+TO+DESCRIBE+TRENDS+IN+GRAPHS,

Unit 2. Basic Terms of Macroeconomics

Before You Read.

Answer the following questions:

1. Do you know what Macroeconomics is?

2. How is it different from Microeconomics?

3. Match the following words and phrases with the definitions and translate them into Russian, check your answers with the key.

Key Vocabulary

1.Interest rate	a. a stable situation in which forces cancel one another
2 Equilibrium	b.the total supply of goods and services that firms in a national economy plan on selling during a specific time period.
3. Aggregate supply	c. the rate at which interest is paid by a borrower for the use of money that they borrow from a lender.
4. Consumer household	d. a custom to buy, something that a consumer is used to doing; habitude; settled practice
5. Consumer spending habit	e. home, domestic establishment of consumers;
6. A financial forecaster	f. a person who performs financial analysis for external or internal clients as a core part of the job.
7. Consumer buying habit	g. a person, who makes financial forecasts (future events)
8. A financial analyst	h.a custom to spend, something that a consumer is used to doing; habitude; settled practice