Question

Discuss the major differences between macroeconomics and microeconomics. Refer to two or three of the theories, concepts, terms or models that you can apply in daily life.

Answer 1

The macroeconomics deals with the problems faced at the economy level, whereas the microeconomics deals with the problems faced at the firms and household level. Here, it is the firm that produces and sell to the households, and households sell their labor factor of production. But, as a part of macroeconomics, policies are designed to maintain a sufficient level of aggregate demand and supply in the economy so that households get employment.

For example, models of demand and supply to achieve an equilibrium price and quantity of goods that We buy is decided. For example, purchase of day to day goods for consumption is dependent on these models of demand and supply, a case of microeconomics. But, economy has a price level that is based basket of goods or GDP. It is used to calculate inflation, as part of macroeconomics.

In second example, responsiveness of  demand w.r.t. the price is elasticity that we see when we buy products such as gasoline. It is microeconomics. But, government is reducing tax (fiscal policy) to increase our disposable income and spend more. It is the case of macroeconomics.