What is Micro Economics?
Microeconomics deals with an economy at a narrow scale as it studies individuals, firms, household, and their behavior in decision-making and resource allocation.
However, it deals with individual economic issues and applies to goods, services, and markets.
It also involves the study of individual markets, sectors, or industries in contrast to macroeconomics which deals with the economy on a national level.
Thus, microeconomics aims to help analyze market mechanisms for established prices of goods and services and limited allocated resources among alternative uses.
It is also beneficial for analyzing the market trends for products or services. It is also beneficial for analyzing the reasons for market failure for efficient results.
Microeconomics focuses on firms and individuals dealing with economic policies like changing taxation and behavior.
So, we can call microeconomics price theory. It is also beneficial for studying the behavior of individual producers, consumers, etc. The consumption, allocation, production, and pricing of goods are also explained by microeconomics.
What is Macro Economics?
Macroeconomics is the branch of economics that deals with the performance, behavior, structure, and decision-making of an economy at the national level or as a whole.
For example, it deals with interest rates, taxes, high inflation, Gross domestic product (GDP), and governments’ spending for regulating economic growth and international financial transactions for imports. It also includes national, regional, and global economies.
However, macroeconomics also deals with the gross domestic product (GDP), unemployment, output, consumption, demands, savings, investment, national income, national and international trade, finance, price indices, inflation, energy, etc.
Micro and macroeconomics are the two most important and general fields in economics and finance. It also focuses on the overall performance of a country or region, etc.
Further, macroeconomics discusses the relationship between these parameters and how much each factor affects the economy. Like most complex things, various macro viewpoints have evolved.
Macroeconomics has two important focused areas long-term growth and the short-term business cycle. It also helps to achieve the overall economic goals of countries and organizations.
Difference Between Micro and Macro Economics
Micro and macroeconomics are the two major and general branches of the economy that work differently.
Microeconomics deals with individual and corporate decisions and financial resources. At the same time, macroeconomics deals with national and government-level decisions.
Microeconomics helps deal with or solve operational or internal issues. While in contrast to this, macroeconomics deals with external or environmental issues.
Microeconomics examines any economy from the ground or very initial stages.
In contrast to this, macroeconomics has a top-down approach.
Microeconomics tells you about the individual market, while macroeconomics focuses overall economy, like GDP.
Microeconomics affects goods prices, and macroeconomics has an inflation impact on the overall economy.
Microeconomics is responsible for demand and supply on individual or market levels. Macroeconomics has aggerated demands and supply.
Comparison Between Micro and Macro Economics
| Parameters of Comparison | Microeconomics | Macroeconomics |
| Definition | Microeconomics deals with an economy at a narrow scale as it studies individuals, firms, household, and their behavior in decision-making and resource allocation. | Macroeconomics is the branch of economics that deals with the performance, behavior, structure, and decision-making of an economy at the national level or as a whole. |
| Business application | Individuals or firms, or country operational and internal issues. | It deals with general environmental and external Issues of countries. |
| Importance | It helps determine product prices and factors involved in the production, including labor and manufacturing costs. | It helps maintain stability and focuses on solutions to major issues like inflation, unemployment, poverty, etc. |
| Scope | It covers issues like demand and supply, production factors, pricing, consumption, and economic welfare on the local or individual level. | It covers diverse national issues like GDP, per capita national income, distribution, employment, money, poverty, etc. |
| Deals with | Individual economic variables. | Aggregate economic variables. |
| Limitations | It is founded on unrealistic underlying assumptions, such as high employment in society, which is unrealistic in microeconomic theory. | The mistake of composition has been researched, and it has been discovered that it appears to be false even though it is likely because what holds for the whole (comprehensive) may not hold for people. |
References
- Marchant, Mary A.; Snell, William M. “Macroeconomics and International Policy Terms” (PDF). The University of Kentucky. Archived (PDF) from the original on 2007-03-18. Retrieved 2007-05-04.