Economics is a complex subject. Many learners at the school of business find it challenging to comprehend and grasp these economic concepts.
Macroeconomics and microeconomics are vital sections of economics. The purpose of the division is to help simplify the course for the learners.
So, what is the main difference between micro and macro economics? Macroeconomics deals with the study of the whole economy. Microeconomics deals with the study of a particular segment of the economy and market.
This article provides the further difference between micro and macroeconomics in tabular forms. Take the time to read through it to learn examples of micro and macroeconomics.
Keep in mind that these branches of economics complement one another and are interdependent. But they do differ in terms of the scale of the course being studied.
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Comparison Table (Microeconomics Vs Macroeconomics)
| Basic Terms | Microeconomics | Macroeconomics |
| Meaning | It is the study of a particular market and segments of the economy. | It is the study of the whole economy. |
| Significance | Analyses the impact of supply and demand for resources based on consumers’ choices. | Explains how the economy is affected in terms of unemployment, national income, and prices of commodities. |
| Focus | Trends, characteristics, and changes in a market segment. | Inflation, employment, and aggregate demand. |
| Scope of Study | Deals with the behavior of firms, individuals, and households. | Deals with behavior and performance of the entire economy. |
| Approach | Decisions are made by businesses and individuals. | Decisions are made by the nation and government. |
| Application | Investment decisions | Analytical tool for drafting economic policies by the government. |
| Strategy | Consider a bottom-up approach by focusing on demand and supply. | Consider the top-down approach to ascertain the nature and course of the entire economy. |
| Inferences | It only provides an explanation of situations that occurs due to certain conditions change. | Provides an understanding of government policies and their impact on the whole economy. |
| Relevance to Investors | Provide useful insights for investment decisions. | Play a little role in investment decisions. |
| Determinants | Demand, supply, economic welfare, production, consumption, and more. | National income, GDP, employment, distribution, employment, money, and more. |
| Examples | Consumer equilibrium, individual income, and savings. | Inflation rates, rate of employment, GDP, national income, and savings. |
What Is Microeconomics?
It is a branch of economics that deals with the behavior and performance of a small market segment such as firms and households.
The subject helps to explain how the limited resources are allocated among various individuals to satisfy their needs and wants.
It also outlines ways how the limited resources can be utilized to attain maximum output and social welfare. But it depends on how the demand and supply tool affect the market segment.
Examples of microeconomics are consumer behavior, labor market, supply, and demand in an individual market. These factors help investors to make vital investment decisions.
Pros of Microeconomics
- Ideal for a free market economy
- Determine the price of commodities and factors of production
Cons of Microeconomics
- Unrealistic assumptions
- Provides a small analysis of small market segment
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What Is Macroeconomics?
It is a branch of economics that deals with the study of an entire economy. It is a broad scope that focuses on national income, GDP, and changes in unemployment.
Macroeconomics helps to address the economic growth, driving forces, and ways to further improve. The subject also helps to clarify economic policies and how to achieve them.
Examples of macroeconomics are consumer choices, demand, supply, social welfare, opportunity cost, prices, elasticity, and competition.
Macroeconomics discusses issues affecting the economy and identifies ways to resolve them without compromising the set economic policies.
Pros of Macroeconomics
- Determine the balance of payment
- Set economic policies and solve issues of public finance
Cons of Macroeconomics
- Economy is heterogeneous
- It only covers aggregated variables
Main Difference between Micro and Macro Economics
- Microeconomics deals with individual markets and macroeconomics deals with the whole economy.
- Microeconomics studies the impact of price on commodities and macroeconomics studies economic growth, inflation, and national income.
- Microeconomics focus on the individual labor market and consumer behavior. Macroeconomics focus on national and world economies.
- Microeconomics determinants are production, consumption, demand, supply, and factor pricing. Macroeconomics determinants are national income, monetary policies, and employment.
- Microeconomics is operational on internal issues whereas macroeconomics is on environmental and external issues.
- Microeconomics concentrates on a single economic unit. Macroeconomic concentrates on economic variables.
- Basic tools for microeconomics are demand and supply while aggregate demand and supply are for macroeconomics.
- Microeconomics takes a bottom-up approach and macroeconomics takes a top-down approach.
- Careers of microeconomics are economists, professors, financial advisors, and researchers while macroeconomics are general economics, lecturer, and financial advisors
Similarities between Micro and Macro Economics
- Both are branches of economics
- Both are interdependent
- Both have an impact on the economy
- Both have the same careers in the long run.
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In Conclusion
The difference between micro and macroeconomics depends on several factors. Microeconomics studies operation or internal issues while macroeconomics studies environmental issues.
Microeconomics is a concern with the behavior of individual entities such as households, firms, and small market segments. Macroeconomics focuses on behavior, performance, and decision-making.
The basic concepts of microeconomics are opportunity cost, preference relations, demand, and supply. Macroeconomics concepts are inflation, unemployment, output, and national income.
Macroeconomics helps to determine the overall health of the economy, standards of living, and the economy’s need for improvement.
Microeconomics helps to come up with economic policies that improve an individual business entity. It forms a foundation for macroeconomics.
More Sources and References
- Jeff Carpenter. Microeconomics and Macroeconomics Concepts. Middlebury University.
- Role of Micro and Macro Economics. The University of Bath.