Micro vs. Macro Economics

Today’s Economics class was almost hilarious throughout. First if taxes (T) depend on Income (Y) as T=tY, then t can not be greater than 1, otherwise people will start playing Cricket.


That’s what happened in “Lagaan”. 😀 (Though for most of the readers I have, simple Mathematics should not be a problem, but for the sake of explaining, if t>1, that would mean taxes is more than the income!)

Further, there is a difference between the demand curve we study in Microeconomics and Macroeconomics. (Demand curve shows relationship between price and demand and is downward sloping i.e. if price increases, demand decreases.) In Microeconomics we study the demand curve of a single product. So, if the price increases for that product the consumers reduce its consumption and substitute it with other cheaper products. In this case the heroine tells the hero, “Kyonki sone pe chhayee mahngai, main chandi le aayee” (Since gold has become costlier, I have brought silver for you [as a gift]). But in Macroeconomics we talk of Aggregate Demand i.e. demand of all goods and services taken together. Here the price indicates the general price level of various goods and services in the economy. Hence, an increase in price level brings down the consumption of all the goods and services as a whole. In this case the hero gets frustrated and asks the heroine, “Ye jo thode se hain paise, kharch tum pe karoon kaise?” (The little money that I have, how should I spend it on you?)

For the uninformed, these are from two songs in two different Hindi Movies of 90s.

This entry was posted in IIML, Imported from Old Blog, Time Pass by Jaya. Bookmark the permalink.

About Jaya

Jaya Jha is an entrepreneur, a techie, a writer and a poet. She was born and brought up in various towns of Bihar and Jharkhand. A graduate of IIT Kanpur and IIM Lucknow, she realized early on that the corporate world was not her cup of tea. In 2008, she started Pothi.com, one of the first print-on-demand publishing platform in India. She currently lives in Bangalore and divides her time between writing and working on her company's latest product InstaScribe (http://instascribe.com) with a vision to make it the best e-book creation tool. Blog: https://jayajha.wordpress.com Twitter: @jayajha Facebook: http://facebook.com/MovingOnTheBook

One thought on “Micro vs. Macro Economics

  1. Since I am removing the Haloscan Comments, I am copy-pasting the comments I got on this post here.

    read u r post at the right time.. as our economics classes r on giving us very good cure for the insomnia…
    keep it up
    santosh | Email | Homepage | 02.16.05 – 10:15 pm | #

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