A Micro-Macroeconomic Analysis Based on a Representative Firm

In this paper, I develop a method of analysis incorporating elements of micro- and macroeconomics as well as general equilibrium, in order to examine the effects of economy-wide changes in demand, costs, expectations, etc. It focuses on the microeconomics of a representative firm1 but takes account of the effects of macroeconomic variables (aggregate demand, aggregate output and the price level) on the demand and cost functions of the firm. It thus goes beyond a partial microeconomic analysis but stops short of a fully general equilibrium analysis of the Arrow-Debreu type. It deals with aggregates and averages but with the microeconomic foundation built-into the analysis. Our method is based on a number of simplifications (some essential, some purely for simplicity) outlined below. If we view the method as using the response of the representative firm to approximate the response of the whole economy, the simplifications involved seem reasonable. In the spirit of positive economics, whether the approximation is acceptable can be settled only by empirical testing of the conclusions of the theory. By way of conclusions, our method not only provides strong qualitative results but in some cases also quantitative results summarized into the four propositions below. Since our method can be used either for the whole economy or for an industry (on which see Ng, 1981a), it has significance for both macro- and microeconomic problems

Aggregate (composite) · Aggregate demand · Arrow · Econometrics · Economics · Effective demand · General equilibrium theory · Macro · Macroeconomics · Mathematical economics · Microeconomics · Order (exchange) · Partial equilibrium · Computer Science · Economic theories and models · Economic Theory and Policy · Fiscal Policy and Economic Growth

• Changes in output and the price level

  Open Access•Kaludura Abayasiri-Silva•Mathematical Social Sciences•1991

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• Business confidence and depression prevention

  Open Access•Yew-Kwang Ng, Yew‐kwang Ng•Mathematical Social Sciences•1992

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• Monopolistic Competition and General Equilibrium Theory

  Nicholas Kaldor, Robert Triffin•Economica•1942

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• Macroeconomics with Non-Perfect Competition

  Yew-Kwang Ng, Yew‐kwang Ng•The Economic Journal•1980

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