BUS Unit1 - Individual Project - Research Paper Example

The subject matter of economics includes the study of the behavior of the markets, the buyers and the sellers and how different quantities of the goods are bought and sold at the various prices that are determined by the forces of demand and supply. The subject also includes the activities of the government but from an individual point of view only and how the consumption of an individual will increase or decrease with the changes in the tax rates imposed by the government (Perloff, 2007). It tries to achieve the equilibrium in a market by efficiently allocating the resources among the individuals with fixed income and endowment.

For example, a firm in a typical oligopoly market would try to reduce the price of the final product by using the cost efficient technology and resources and thereby increase the sales which in turn would maximize its profit. On the other hand Macroeconomics deals with the study of how the economy of the country or the world economy behave due to fluctuations of the Macroeconomics variables like income, inflation, unemployment rate, rate of growth, the rates of interest and the rates of taxes in the economy .

This subject throws light on the bigger picture of the economy and how the variables interact with each other to affect the gross domestic product of a country. Hence this subject is mostly analyzed from a policymaker’s point of view. It makes an attempt to control the economic variables in the disequilibrium position to achieve a desired rate of growth of the economy (Blanchard, 2000). For instance, when the central bank of a country wants to reduce the amount of inflation in the economy it would want to reduce the liquidity and hence it would increase the rates of interest.

As a result of this the people in the economy would start keeping their money in the banks and would cut their spending and thus the aggregate demand would decrease. This is a