Microeconomicstalks about the actions of an individual unit, that is, an individual, company, family, market, industry, etc. On the other hand, themacroeconomicstudies the economy as a whole, that is, it does not evaluate a single unit, but the set of all, that is, companies, families, nation, industries, market, etc.
"Economics" is defined as the study of how humans work together to convert limited resources into goods and services to satisfy their (unlimited) wants and how they distribute them among themselves. Economics has been divided into two main parts, namely microeconomics and macroeconomics. There are two broad categories into which economics is classified, namely microeconomics and macroeconomics.
Here in the article in question, we detail the concept and all the important differences between microeconomics and macroeconomics, in tabular form, take a look.
Contents: Microeconomics Vs Macroeconomics
- Comparison Chart
- Main differences
- Pros and cons
|basis of comparison||Microeconomics||macroeconomic|
|Sense||The branch of economics that studies the behavior of an individual consumer, company, family is known as Microeconomics.||The branch of economics that studies the behavior of the entire economy (national and international) is known as Macroeconomics.|
|deal with||individual economic variables||Aggregate economic variables|
|commercial application||Applied to operational or internal issues||Environment and external issues|
|Instruments||demand and supply||Aggregate Demand and Aggregate Supply|
|Assumption||It assumes that all macroeconomic variables are constant.||It assumes that all microeconomic variables are constant.|
|Worried||Product pricing theory, Factor pricing theory, Welfare theory.||National Income Theory, Aggregate Consumption, General Price Level Theory, Economic Growth.|
|Attain||It covers various topics such as demand, supply, product prices, factor prices, production, consumption, economic well-being, etc.||It covers various topics such as national income, general price level, distribution, employment, money, etc.|
|Importance||Useful for determining the prices of a product along with the prices of the factors of production (land, labor, capital, employer, etc.) within the economy.||It maintains stability in the general price level and solves the main problems of the economy such as inflation, deflation, reflation, unemployment and poverty as a whole.|
|limitations||It is based on unrealistic assumptions, that is, in microeconomics it is assumed that there is full employment in society, which is not possible.||It has been analyzed what the 'Composition Fallacy' consists of, which sometimes turns out not to be true because it is possible that what is true for the aggregate is not also true for individuals.|
Definition of Microeconomics
Microeconomics is the branch of economics that focuses on the behavior and performance of individual economic agents within the economy, such as consumers, households, industry, companies, etc. Check how limited resources are allocated among various individuals to satisfy their desires? It also specifies the conditions for the best possible use of resources, in order to achieve maximum income and social welfare.
Here, demand plays a key role in determining the quantity and price of a product, along with the price and quantity of related goods (complementary goods) and substitute products, to make a judicious decision about the allocation of scarce resources. . as to its alternative uses.
Does microeconomics look at how individuals and families spend their income? How do people decide how much to save for future contingencies? What set of goods and services best meets your limited income needs and wants?
Does it also determine what products and how many products the company must make in order to sell? At what price should the company offer its products and services to the target audience? What sources of financing should the company use to start or operate the business? How many and at what rate should workers be hired to work in the company? When should the company expand, downsize, and close?
Definition of Macroeconomics
In macroeconomics we talk about the entire economic phenomenon or the economy as a whole. Basically, it focuses on the behavior and performance of aggregate variables and issues that affect the economy as a whole.
It includes regional, national and international economies and covers the main areas of the economy such as unemployment, poverty, general price level, total consumption, total savings, GDP (Gross Domestic Product), imports and exports, economic growth, globalization, monetary policy / tax policy etc
Here we discuss how equilibrium is achieved as a result of changes in macroeconomic variables. Do you check the level of economic activity in the economy? What is the rate of unemployment, poverty and inflation in the country? What are the problems that result in the acceleration or deceleration of the economy? What is the standard of living of people in the country? What is the cost of living in the country?
Furthermore, macroeconomics not only analyzes the problems that the economy is going through, but also helps to solve them, allowing it to function efficiently.
Main differences between micro and macro economy
The points given below explain the difference between micro and macro economics in detail:
- Microeconomics studies the specific segment of the economy, that is, an individual, family, company, or industry. Study economic issues on an individual level. On the other hand, Macroeconomics studies the economy as a whole, it is not a single unit, but studies aggregate units such as national income, the general level of prices, total consumption, etc. It deals with general economic issues.
- Microeconomics emphasizes individual economic units. Faced with this, the focus of macroeconomics is on aggregate economic variables.
- Microeconomics is applied to operational or internal issues, while environmental and external issues are of interest to macroeconomics.
- The basic tools of microeconomics are supply and demand. On the other hand, aggregate demand and aggregate supply are the main tools of macroeconomics.
- Microeconomics deals with an individual product, company, family, industry, wages, prices, etc. On the other hand, macroeconomics deals with aggregates such as national income, national production, price level, total consumption, total savings, total investment, etc.
- Microeconomics covers issues such as how the price of a given good will affect its quantity demanded and quantity supplied, and vice versa. Instead, Macroeconomics covers the main problems of an economy, such as unemployment, monetary/fiscal policies, poverty, international trade, inflationary price increases, deficit, etc.
- Microeconomics determines the price of a particular product along with the prices of complementary and substitute goods, while macroeconomics helps maintain the general price level, as well as helps solve major economic problems such as inflation, deflation, disinflation, poverty, unemployment, etc. .
- When analyzing any economy, microeconomics takes a bottom-up approach while macroeconomics takes a top-down approach.
Video: Microeconomics Vs Macroeconomics
- It helps determine the prices of a particular product and also the prices of various factors of production, i.e. land, labor, capital, organization, and entrepreneur.
- It is based on a free enterprise economy, which means that the company is independent in making decisions.
- The assumption of full employment is completely unrealistic.
- It analyzes only a small part of an economy, while a larger part is left untouched.
- It helps determine the balance of payments, along with the causes of the deficit and surplus.
- It helps decide economic and fiscal policies and solves public finance problems.
- Your analysis says that the aggregates are homogeneous, but this is not so because they are sometimes heterogeneous.
- It only covers aggregate variables that impede the well-being of the individual.
While microeconomics focuses on the allocation of limited resources among individuals, macroeconomics examines how the distribution of limited resources among many people should be done so that it makes the best possible use of scarce resources. While microeconomics studies individual units, macroeconomics in turn studies aggregate variables.
Both believe that the nation's economic well-being is only possible when there is the best possible use of productive resources. In this way, we can say that they are interdependent. Likewise, to have a complete understanding of the economy, the study of both branches is pertinent.
Micro and Macroeconomics are not different or contradictory disciplines, but rather complementary. As every currency has two aspects, microeconomics and macroeconomics are also the two aspects of the same currency, where the demerit of one is the merit of the others and therefore covers the entire economy. The only important point that makes them different is the area of application.
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