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CH 2] Business 101 2-3

topics are covered in economics classes, and are introduced here to assist your
comprehension of the following material.
Let us review these small words, economics, macro and micro, joined together
(concatenated) to create bigger words, and their meanings for clarity. Economics, is a
word of Greek origin meaning ‘home management’. Micro is a word of Greek origin
meaning ‘small’. Micro concatenated (joined together) with economics creates a larger
word ‘microeconomics’, and when plainly translated would be small home
management. Macro, also another word of Greek origin, meaning large. Macro when 2
concatenated (joined together) with economics yields ‘macroeconomics’, and a plain
translation is large home management.
It is easy to grasp that micro (small) and macro (large) are relational terms and
could be thought of as a continuum; that is small grows to large. As such
microeconomics and macroeconomics have a continuum relationship.
Consider the continuum in these terms: you are an economic unit, a
microeconomic unit. You have income and expenses and hopefully your excess
(profit) is put away for savings and investments and will accumulate. Each of your
classmates are also microeconomic units. Combining all of the classes income and
expenses would represent a macroeconomic unit. In comparison of you to your class,
you are microeconomics and the class would be macroeconomics. Carrying this
relational thought out to the absurd (?), your class would be microeconomics for its
income and expenses when compared to your school, which would be classes as
macroeconomic. Your school in relation to your community, the school is a
microeconomic consideration and the community is a macroeconomic unit. Your
community’s economic relationship to the county: the community is micro and the
county is macro. Looking at the county in relation to the state, the county becomes
micro and the state macro. Again, the state in relation to the nation, the state is micro
and the nation is macro.
Look at these same relationships to your business field. You could be a poultry
producer or a grocer. The individual poultrymen would be micro in relation to all of
the poultrymen in the region, and in turn those regionally conglomerate poultrymen
would be micro in relation to all the poultrymen in the nation. Similarly, as a grocer,
your store would be micro in relation to all of the grocers in your community (macro);
in turn those grocers in your community would be micro in relation to all of the
grocers in your state (macro). Note the continuum of the relationship beginning with
small (the individual) to large, regardless of what is encompassed as large.
Economically speaking, the scarce resources are individually decided on how they
are assembled and employed (literally thousands of decisions), they have a cost and
are employed with the anticipation of yielding a profit. Every owner of a firm wants to
make a profit, where gross incomes exceed gross expenses. Even government wants
private firms to be profitable; it is from the profits that the government (the state)
garners its tax revenues so that it can pay to fund its activities. When private firms are
not profitable, then the state cannot collect taxes.

Macroeconomics
For nations and states to function (perform their duties and functions) requires the inflation
aggregate interaction of commerce and the ability for the state to tax that commerce. Situation in which there are
For the state to financially prosper and grow requires that there be more individuals rising prices or decreased
engaged in the production of goods and services than those working for government or purchasing power of the
receiving the largess of governments taxing powers. This is mandatory to have a nation's currency.
healthy, vibrant, productive and profitable private industries. Yet, there exists three
threats to all economies: inflation, unemployment, and deflation. Inflation is a
situation where there are rising prices in response to a decline in purchasing power of
the nation's currency. The cause of inflation is that government prints too much
currency and places it into circulation relative to the goods and services available for
sale. The outcome is that the currency looses purchasing value.
However, many economists use a Keynesian Economic approach that differentiates
inflation as either cost-push inflation or demand-pull inflation. Without investigating

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