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June 2013 Part B

The document explains that microeconomics examines individual units like industries and decisions while macroeconomics focuses on aggregates like national income and consumption. It defines demand as the quantity willing and able to be bought at various prices and distinguishes between a change in demand, which shifts the demand curve, and a change in quantity demanded, which moves along the demand curve due to price changes. Diagrams are used to illustrate these concepts of demand and the differences between changes in demand versus quantity demanded.

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Nur Lurve
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166 views

June 2013 Part B

The document explains that microeconomics examines individual units like industries and decisions while macroeconomics focuses on aggregates like national income and consumption. It defines demand as the quantity willing and able to be bought at various prices and distinguishes between a change in demand, which shifts the demand curve, and a change in quantity demanded, which moves along the demand curve due to price changes. Diagrams are used to illustrate these concepts of demand and the differences between changes in demand versus quantity demanded.

Uploaded by

Nur Lurve
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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June 2013

Part B

Question 1

a) Using appropriate examples of each, explain the difference between microeconomics


and macroeconomics.

Answer:

Microeconomics means examines the functioning of individual industries and the


behavior of the individual decisions making. Other meaning is a study of the small units
in the economy. While macroeconomics means the focuses on the determinants of total
national income, deals with aggregate s such as aggregate consumption and
investment. Other meaning for macroeconomics is a study of the economy as a whole
aggregate (total).

The difference between microeconomics and macroeconomics are looked at the way the
economy behave.
b) Define demand. With the help of appropriate diagrams, distinguish between a change in
demand and a change in quantity demanded.

Answer:

Demand is define as the amount or number of units of a product or service that


people or a household willing and able to buy or pay at a particular time and at a given
range of prices in a given market. Law of demand states that the higher the price the
smaller the quantity demanded for that good and vice versa where the lower the price for
a certain good or service the higher the quantity demanded for that good or service while
ceteris paribus where it means that other things remain constant or being equal. The
demand curve produced the negative relationship between price and quantity demanded
as shown in the graph below. There are two level of demand which is individual demand
and market demand. Market demand is the aggregate of individual demand.

Price (Ice-cream)
D

P B

P0 A

D
Quantity (Ice-cream)
Q1 Q0

Graph 1

Change in quantity demanded refer to a movement along a given demand curve


or change in quantity demanded. It is due to changes in the price of the good itself.
Changes in the price of a product affect the quantity demanded per period. For instance,
based on the Graph 1 above, we can say that an increase in the price of ice-cream from
P0 to P1 is likely to cause a decrease from Q0 to Q1 whereas it change movement of the
demand curve from point A to point B in the quantity demanded for ice-cream.
Price (Coca-Cola)

D0
D1

D0
D1
Quantity (Coca-Cola)

Graph 2

Change in demand refer to a shift in the demand curves whether it shift to the left or it
shift to the right where demand increase or demand decrease. It is due to other factor other than
the price of the product itself which includes income, price of related goods, taste and
preferences, number of consumer, expectation, seasonal factor, and government policy that
includes tax and subsidy. For example, based on Graph 2 above, the demand curve for Coca-
Cola product will shift to the left which is from D0 to D1 as a result on price of related product
such as Pepsi in which it is a substitute product of Coca-Cola. So, if the price of Coca-Cola
increases customer will shift to Pepsi as its price is lower than Coca-Cola. Therefore, it will
decrease the demand for Coca-Cola product.
References:

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