Microeconomics vs Macroeconomics

Microeconomics vs Macroeconomics

There are differences between microeconomics and macroeconomics, although, at times, it may be hard to separate the functions of the two. First and foremost, both of these terms mentioned are sub-categories of economics itself. As the names of ‘micro’ and ‘macro’ imply, microeconomics facilitates decisions of smaller business sectors, and macroeconomics focuses on entire economies and industries. These two economies are mutually dependent, and together, they develop the strategy for the overall growth of an organization. They are the two most important fields in economics, and are necessary for the rise in the economy.

Microeconomics focuses on the market’s supply and demand factors that determine the economy’s price levels. In other words, microeconomics concentrates on the ‘ups’ and ‘downs’ of the markets for services and goods, and how the price affects the growth of these markets. An important aspect of this economy is also to examine market failure, i.e. when the markets do not provide effectual results. In our present time, microeconomics has become one of the most important strategies in business and economics. Its main importance is to analyze the economy forces, consumer behavior, and methods of determining the supply and demand of the market.

On the other hand, macroeconomics studies similar concepts, but with a much broader approach. The focus of macroeconomics is basically on a country’s income, and the position of foreign trades, with the study of unemployment rates, GDP and price indices. Macroeconomists are often found to make different types of models, and relationships, between factors such as output, national income, unemployment, consumption, savings, inflation, international trade, investment, and international finances. Overall, macroeconomics is a vast field that concentrates on two areas, economic growth and changes in the national income.

Governments make policy changes to avoid different types of economic distress, as they know how to steady the economy. This is one of the best approaches to stabilize and ensure the growth of the nation’s economy. Therefore, macroeconomics maintains two strategies:

Fiscal Policy: The most important aspect of fiscal policy is taxation and government spending, where the government will focus of the collecting of revenue to empower the economy. This can create a solid impact on the economic growth.

Monetary Policy: This policy controls the monetary authority, central bank, or government of a country, and focuses on the availability and supply of money and interest rates, in order to sustain the growth of the economy.

Differences

Microeconomics and macroeconomics are important studies within economics that are essential to sustain the overall growth and standard of the economy. While the two studies are different, with microeconomics focusing on the smaller business sectors, and macroeconomics focusing on the larger income of the nation, they are interdependent, and work in harmony with each other. The main differences are:

1.Microeconomics focuses on the market’s supply and demand factors, and determines the economic price levels.

2.Macroeconomics is a vast field, which concentrates on two major areas, increasing economic growth and changes in the national income.

3.Microeconomics facilitates decision making for smaller business sectors.

4.Macroeconomics focuses on unemployment rates, GDP and price indices, of larger industries and entire economies.

Microeconomics is generally the study of individuals and business decisions; macroeconomics looks at higher up country and government decisions. Macroeconomics and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. The field of study is vast; here is a brief summary of what each covers:

Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize its production and capacity so it could lower prices and better compete in its industry. (Find out more about microeconomics in Understanding Microeconomics.) 

Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena, such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by unemployment rate. (To keep reading on this subject, see Macroeconomic Analysis.)

While these two studies of economics appear to be different, they are actually interdependent and complement one another since there are many overlapping issues between the two fields. For example, increased inflation (macro effect) would cause the price of raw materials to increase for companies and in turn affect the end product's price charged to the public.

The bottom line is that microeconomics takes a bottoms-up approach to analyzing the economy while macroeconomics takes a top-down approach. Regardless, both micro- and macroeconomics provide fundamental tools for any finance professional and should be studied together in order to fully understand how companies operate and earn revenues and thus, how an entire economy is managed and sustained. 

Hello guys, we are here to learn the difference of Micro and Macro economics. Below I have explained in brief. Just go through it and finally you will come to know the main difference between them.

Micro Economics:-

• It deals with an individual's economic behavior.
• It deals with the pricing of a particular commodity in an industry.
• It deals with the income of a particular set of people.
• Study of micro economics is important for resource utilization, public finance, and for taking business decisions.
• The concepts of micro-economics are independent concepts.
• The concepts were popularized by the famous Alfred Marshall.
• These concepts have more theoretical value.

Macro Economics:-

• It deals with aggregate economic behavior of the people in general.
• It deals with the general price level in the economy, National income accounting, etc.
• Study of macro economics is important for formulation of economic policy of the whole nation.
• The concept of macro economics is interdependent on one another.
• The concepts were popularized by the famous Lord J.M. Keynes.
• These concepts have more practical value.

Microeconomics and macroeconomics--micro and macro, as many economists call them--are the two major subdivisions in the field of economics. Micro examines the economy in miniature, while macro concerns itself with economic aggregates, such as gross domestic product or national unemployment rates.

Micro economic is a branch of economics which focuses on the market attitude of the individual customers and organizations which enables the business to understand the market behavior in micro perspective. Micro economics enables the business organizations to take decisions on the smaller and critical aspects; it also takes the factors affecting such decisions into consideration. It was Adam Smith - the father of economics who did an elaborative analysis on these concepts that is micro and macro economics. Micro economics today is become an important branch of study in the field of economics and business.

The following points will highlight the importance of micro economics:

It enables in establishing a method which can analyze individual economic forcesØ

The market behavior of the consumers can be understood which is very much helpful in decision making through micro economicsØ

It also leads to understanding of the individual supply and demand determinants of the marketØ

Now let us take look at what macro economics means. Macro economics is that branch of economics which studies the economics in a broader sense for example it deals with national income of the country or the buying behavior of the Indians and foreign trade position of India. Here the behavior of the economy is studied as a whole and as matter of fact both macro and micro economics are very inter-dependent in nature and both influence in decision making and strategy formulating of an organization.

Though they are interdependent they are still different from one another and the following points will justify their differences:

Micro economics studies the individual behaviorØ that is it studies the consumption behavior or attitude of a consumer whereas macro economics on the other hand studies the overall market structure, that is enables the organization to understand the size and capacity of the market.

The demand in micro economics directlyØ depends on the individual's expectations where as in micro economics the demand depends on the organization's expectations.

In theØ pricing method micro economics concerns with the price of a individual product whereas in macro economics the overall production costs is considered

Taxation is another example which determines theØ difference between these two fields of economics. Micro economics deals with the individual's tax aspects where macro economics deals with the overall tax aspects of the country.

Therefore by looking at the above differences between micro and macro economics we can conclude that both these approaches towards the field of economics today occupy a valuable niche.

Difference between Micro and Macro Economics

Economics as a concept is not important only for those who are studying finance or economics, but economics is important for every other individual whether he or she is a doctor or an engineer or a businessman. Everyone uses economics in daily life and therefore one should know what exactly economics is, well in simple words economics is a study of how individuals and groups make decisions with limited resources so that they can satisfy their needs and wants.

Economics is divided into two parts or branches one is micro economics and other is macro economics, let’s see what are the differences between micro and macro economics.

1. While micro economics refers to study of economic behavior of individuals, families, or a company while macro economics refers to that branch of economics which deals with the economic behavior of the society or nation as a whole.

2. The scope of micro economics is limited as it deals at individual level, while the scope of macro economics is much wider and it studies things like inflation, unemployment, interest rate effect on economy and gross domestic product of an economy of the country.

3. Example of micro economics study is what will be the consequence of increase in salary of an individual will have on his or her purchasing power, while macro economics study what will be the consequence of higher inflation on growth of the economy or how rise in gross domestic product will help in generating employment opportunities.

Macro- and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. The field of study is vast; here is a brief summary of what each covers:

Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine price levels for specific companies in specific industry sectors. For example, microeconomics would look at how a specific company could maximize its production and capacity so it could lower prices and better compete in its industry.

Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by unemployment rate.

While these two studies of economics appear to be different, they are actually interdependent and complement one another since there are many overlapping issues between the two fields. For example, increased inflation (macro effect) would cause the price of raw materials to increase for companies and in turn affect the end product's price charged to the public.

The bottom line is that microeconomics takes a bottoms-up approach to analyzing the economy while macroeconomics takes a top-down approach. Regardless, both micro- and macroeconomics provide fundamental tools for any finance professional and should be studied together in order to fully understand how companies operate and earn revenues and thus, how an entire economy is managed and sustained.