Both Microeconomics and Macroeconomics are two branches of economics which deal with two entirely different stream of economic behaviors. Although their concepts are entirely dfferent but they both are highly interdepedendent on each other.
Microeconomics is the study of individual people and individual businessess and analysis of their decison making citing scarce available resources and also relating to pricing of goods and services. In particular, microeconomics focuses on the concepts of demand and supply and any other force that determines the price level in the economy. For Example, any rise or fall in price of a commodity in accordance to change in demand or suuply will be dealth by microeconomics.
On the other hand, Macro Economics is that field of economics, which study the economy as a whole rather than individual consumers or business houses. In other words, it studies the effect of macroeconomic concepts on the economy. For Instance, GDp and how it is affected by output levels, unemplyment levsl is a macroeconomic concepts.
After Hurricane Katrina, what happened to the price of fish?
After the hurricane hit the American Shores, the price of fish went steep high on account of low supply in the market. Considering the price mechanism scenario, after the hurricane, a large number of fish species were reproted to be dead and this had a substantial effect on the total supply of fish in the market. However, since the demand for fish was unchanged as it was not related anyhow to the hurricane, supply of fish had backwards shift where the market achieved new equilibrium points. The equilibrium price of fish went high while the quantity was reduced. The whole scenario was a microeconomic concept and the diagram below will provide a suitable explanation of effect of fall in supply of fish on the equilibrium prices and quantity:
A new health report came out that said red wine lowers cholesterol.
After the new report is out in the market which says that red wine lowers cholestral level, the most likely and immediate effect will be on demand for red wine. Once the new report signifies health benefits of consuming red wine, this will incline the taste and preference of consumers towards red wine and as a result, demadn curve of red wine will shift rightwards indicating increase in demand for red wine and assuming constant supply of red wine, the equilibrium price will increase and so will be the equilirbium quantity. The following diagram will illustrate the effect of favorable health report on demand of wine and equilibrium market:
In order to analyze the coffee industry, we will be analyzing the demand and supply of Starbucks Corporation. Starbucks is a leading premium coffee chain in the industry and on an average basis face an inelastic supply as it has its own sourcing of coffee material. The same goes with demand for coffee also but over the years, Dunkin Donuts has come up as a tough competitor of Starbucks and this has forced starbucks to reduce the price of some of its coffee offerings so as to sustain the demand of its customers. Following diagram will illustrate the current position of Starbucks through supply an demand analysis:
In other situation, where despite the overproduction of coffee and record low prices, Gourmet Coffee was successful to charge higher prices. Initially, when the supply of coffee was high because of overproduction, the prices went sharp down on the basis of price mechanism as demand was almost constant or with negligile increase.
However, in other case when despite of reduced prices of coffee, Gourmet Coffee was successful in chargin high prices to its customers. This was in particular a case of niche marketing where Gourmet Stores were launched in high rent and luxurious areas where major section of consumers were of high income group and paying high prices for the coffee was not a matter of concern for them as the kind of taste and preference which Gourmet Coffee was purely base on attracting high income group people.
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