Question

Discuss the differencies between microeconomicss and macroeconomics. Explain in detail.

Answer 1

The stream of Economics is divided into two parts-Microeconomics and Macroeconomics.Microeconomics studies the decisions of individuals as well as business houses,on the other hand Macroeconomics studies the decisions of countries and governments.

Let us understand each concept in detail so that we can compare them more easily.

Microeconomics - The economy on a whole is made up of many agents like the consumers,industry,firms,families etc.Microeconomics is that segment of economics which lays emphasis completely on studying the behaviour and performance of individual agents of the economy.Microeconomics studies aspects like consumer behaviour,profit maximization of the firms,effects of government regulations,characteristics of various market structure etc.The several key priciples in the study of microeconomics includes,Demand and Supply interactions,Equilibrium of price,Production theory,Cost of Production as well as Labor economics.

Microeconomics aims to answer questions like

How limited resources are allocated among the individuals in the economy,who use them to satisfy their wants.

How resources must be put to optimum use in order to bring about maximum output without hampering the social welfare?

How individuals as well as households spend their income?

What are the sources of finance which the business firms can use to run their operations?

What kind and quantity of products should a firm produce?What should be the price of these products?

What quantity of labor must be employed to achieve the desired production level?

Macroeconomics -Macroeconomics is the study of aggregate variables which effect the economy as a whole.It studies the working and performance of the economy as a whole and not just a market.It Macroeconomics includes the study of the big elements like GDP,Inflation,Economic output,International trade,general price level,unemployment,poverty,total consumption,total savings,monetary and fiscal policy etc.

Macroeconomics aims to answer questions like

What is the level of economic activity in the economy?

What is the rate of inflation,unemployment and poverty?

What is the cost of living of the economy?

Which factors affect the GDP ?

What are the factors which stimulate economic growth?

Difference between Microeconomics and Macroeconomics

Points of difference	Microeconomics	Macroeconomics
Meaning	Microeconomics studies individual economic units of the economy.	Macroeconomics studies aggregate of variables of the economy.
Application.	It is applied to operational as well as internal issues.	It is applied to environmental as well as external issues.
Demand and Supply.	Demand and supply are the basic tools of microeconomics.	Aggregate demand and aggregate primary tools of macroeconomics.
Price	It helps in determining the price of a product.	It helps in maintaining price of a product.
Approach	It takes a bottom- up approach.	It takes a top-down approach.
Issues of covered.	Price of product,demand and supply,wages,household income,individual income etc	National income,national output,inflation,GDP,global trade,monetary policy,fiscal policy etc.