Earn Microeconomics College Credits On Your Schedule
In the study of economics, you’ve likely heard of the most well-known branches: microeconomics and macroeconomics. In this section, we will explore the differences between the two.
Microeconomics focuses on the actions of particular actors within the economy, like households, workers, and businesses. In contrast, macroeconomics looks at the economy as a whole, focusing on issues such as growth, unemployment, inflation, and the balance of trade.
In economics, the micro decisions of individual businesses are influenced by whether the macroeconomy is healthy. For example, businesses will be more likely to hire workers if the overall economy is growing. In turn, the performance of the macroeconomy ultimately depends on the microeconomic decisions made by households and businesses.
The relationship between micro decisions and the macroeconomy can be studied using a model. A model is a simplified representation of an object or situation that includes enough of the key features to be useful. Economic models are diagrams, graphs, or mathematical equations that represent economic patterns or theories.
1.1 Economy and Markets - An economy is the set of social arrangements that determine what’s produced, how it’s produced, and for whom it’s produced. Thus, economics is the study of the production, distribution, and consumption of goods and services.
1.2 The Division of Labor - Division of labor means the way in which the work required to produce a good or service is divided into tasks performed by different workers.
1.3 Globalization - Companies and workers from across the globe have become increasingly interconnected to one another, creating a new, interdependent world. This trend is called globalization, in which buying and selling in markets have increasingly crossed national borders.
1.4 Microeconomics Overview - In the study of economics, you’ve likely heard of the most well-known branches: microeconomics and macroeconomics. In this section, we will explore the differences between the two.
1.5 Policy Tools - With these macroeconomic goals in mind and the frameworks for analyzing how these goals relate to each other in place, the final step is to think about how macroeconomic policy pursues these goals. The two main tools of macroeconomic policy include monetary policy and fiscal policy.
2.1 The Budget Constraint - People live in a world of scarcity. In other words, they can’t have all the time, money, possessions, and experiences they want. People must choose. They inevitably face trade-offs in which they give up things that they want in order to get things that they want more.
2.2 Personal Preferences and Specific Choices - A budget constraint diagram shows what choices are possible based on income and the price of goods.
2.3 The Labor-Leisure Budget Constraint - The budget constraint can be applied not only to the quantity of goods to consume, but also to the choice between labor and leisure. The labor-leisure budget constraint addresses the decision about what number of hours to work, given the wage that can be earned and the limited number of hours in a day.
2.4 Intertemporal Choice and Interest Rates - An intertemporal choice reaches across time. For example, you can borrow money to spend in the present, and promise to repay it in the future. Or you could save money, which involves less consumption in the present, but the ability to consume more in the future.
2.5 The Intertemporal Budget Constraint - There are several types of budget constraints, and they all measure different trade-offs. The consumption choice budget constraint shows the trade-off between two differently priced goods. The labor-leisure budget constraint shows the trade-off between leisure and income.
2.6 The Three Implications of Budget Constraints - The budget constraint framework has some possibly unexpected implications for how a sensible person will make decisions. Let’s discuss three of those implications, involving opportunity cost, marginal decision making, and sunk costs.
2.7 The Production Possibilities Frontier Efficiency - In a world of scarcity, individuals cannot have everything they want, and must make a choice along a budget constraint. Businesses must also make trade-offs.
2.8 Confronting Objections to the Economic Approach - It’s one thing to understand the economic approach to decision making and another thing to feel comfortable that the economic approach is the right approach.
2.9 The Trade-Off Diagram - When faced with the many diagrams in economics, you should learn to recognize the common underlying logic and pattern of the diagrams, rather than simply memorizing each diagram separately.
3.1 And much more to ensure you pass your Microeconomics CLEP test, including: International Trade, Supply and Demand, Globalization, Elasticity, Competition, Household Decision-Making, Monopoly, Inequalities and more -
The following sample questions do not appear on an actual CLEP examination. These questions are intended to give test-takers an indication of the format and idea of what to study!
What Is CLEP? The College Level Examination Program (CLEP) is a group of standardized tests that assess college-level knowledge in several subject areas that are administered at more than 1,700 colleges and universities across the United States created by the College Board. There are 2,900 colleges which grant CLEP credit.
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