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April 02, 2018

Difference Between Micro and Macro Economics

April 02, 2018


Economics is the study of how people use limited resources to satisfy their unlimited wants.  The subject-matter of economics is divided into two main categories - microeconomics and macroeconomics. The term microeconomics is derived from the Greek word ‘mikros’ which means small while the term macroeconomics is also derived from the Greek word ‘makros’ which means large.  This article will explain the concept and distinguish between microeconomics and macroeconomics.


Difference between micro and macro economics


Microeconomics

Microeconomics is the study of particular units of an economy. It looks to individual consumers, individual firms and small group of industries and markets. It helps to solve the three central problems of an economy: 1) What to produce? 2) How to produce and 3) For whom to produce? Microeconomics is concerned with:
  • Theory of consumer’s behavior. (E.g. Law of diminishing marginal utility and indifference curves analysis)
  • Theory of firm’s behavior. (Firms equilibrium)
  • Theory of price. (Equilibrium of demand and supply)
  • Theory of production. (Laws of returns)

Macroeconomics

Macroeconomics is the study of economy as a whole, not just specific unit of an economy. It looks to the entire industries and large-scale economic issues. Its central focus is to determine level of national income and employment. Macroeconomics is concerned with:

  • Reasons for inflation and deflation.
  • Theory of international trade. (Balance of trade and balance of payments)
  • Employment and economic growth.
  • Fiscal and monetary policies.
  • National income and output.
  • Theory of consumption
  • Savings and investment.
  • General price level.

Difference Between Micro and Macro Economics 


1. Micro means small so microeconomics studies small units of an economy. While macro means large so macroeconomics studies large scale of an economy.

2. Microeconomics looks to the particular firms, particular industries, particular households, particular commodities and individual prices, wages and incomes. On the other hand, macroeconomics looks to national income, national output, national consumption and savings, general price level, investment and employment.  

3. The basis of microeconomics is the demand and supply which help to determine equilibrium price in the market. Inversely, the basis of macroeconomics is the national income, national output, employment, general price level, and economic growth and development.   

4. Microeconomics is based on some principles to illustrate different laws, which means microeconomics applies the technique of partial equilibrium analysis. Conversely, macroeconomics applies the technique of general equilibrium analysis which deals with aggregate economic variations.  

5. Microeconomics is generally known as Price Theory. While macroeconomics is generally referred to Theory of Income, output and Employment.
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