Difference between microeconomics and macroeconomics
Microeconomics vs macroeconomics:
It is no secret that economy is a common word we utter these days. Economics is not less used. Food costs rising in accordance with the spiking gas prices, not getting a good interest on the servings account and such phenomenon can be explained through economics. Economics in other words is the social science that analyses the production, distribution, and consumption of goods and services. However in the current context, we find terms microeconomics and macroeconomics. Microeconomics and macroeconomics are basically the subcategories of economics. Although these terms have the apparent difference of one letter, there is a huge difference between the theories in them. Thus, this paper is shedding some light on the differences between these two terms in order those who are yet blind to them can have a clear idea on those differences.
What is microeconomics?
Microeconomics is a branch of economics. As per the meaning of the word ‘micro’, microeconomics deals with smaller issues. Thus, microeconomics deals with individual decisions, units- firms and households. The way in which such decisions interact to determine relative prices of goods and services, factors of production and, how much of that will be bought and sold are also included in microeconomics. Moreover, in microeconomics, public policies such as environmental concerns, poverty, and corporate mergers are discussed. Microeconomics, on the other hand studies the problems of price determination and resource allocation as well. Thus, the main determinant of microeconomics is money. And also, the market is the central concept in micro-economics. However, the main goal of microeconomics is to study how consumer trades in inputs and outputs and how he makes economics decisions, taking into consideration the decision making power of individuals. Determining the relative prices of goods and services, it assumes that the market is competitive and perfect. Effects of tax on the income, utilization of the budget sets are some other objectives of microeconomics.
What is macroeconomics?
Macroeconomics studies the behaviour of the economy as a whole in entire industries and economies. Therefore it deals with the functionality and behaviour of the entire economy of the nation or the world. Thus it deals with larger issues and looks into economy-wide phenomena. It deals with indicators such as the GDP, unemployment and consumer prices indices. Therefore, it has concerns on how each of these variables are interrelated with each other, how their impacts can be corrected using appropriate macro-economic measures like bank rate policies, open market operations and wage adjustment. Thus macroeconomics promotes higher employment level through better economy prioritization. It also helps in studying the conditions of the economy, and facilitates analysis of the same. Macroeconomics, on the other hand plays a great role in determining the price stability. It has concerns on the exchange stability as well. Looking into increasing the capital accumulation is another objective of macroeconomics. On the other hand, microeconomics has the responsibility of ensuring the fair distribution of national income in purpose of achieving desirable consumption.
What is the difference between microeconomics and macroeconomics?
As above mentioned, the difference between microeconomics and macroeconomics does not depend on one single letter. Despite their differences, they are anyway, interdependent since individuals are parts of the main industry and on the other hand, when macroeconomics got to change any policies and regulations, which affect individuals in return.
As per the denotative meaning of these two words, microeconomics deals with smaller issues, while macroeconomics deals with larger issues. Therefore, microeconomics deals with individual firms and consumers, while macroeconomics deals with the whole enterprise as a single unit. Thus, microeconomics takes into account the demand and the supply of individual goods, services and other forces that determine the price levels seen in the economy. Microeconomics focuses on the various factors of supply and demand, and the repercussions of these factors on the price of commodities. On the other hand, macroeconomics consider the aggregate of demand and supply of all goods and services and so, relies heavily on GDP, the unemployment rates, national income and rate of growth. Moreover, macroeconomics focuses on the increase in the economic growth, and the changes in the national income.
While macroeconomics is considering the nations or the world’s economy, microeconomics simply works on decisions and the decision making process of the smaller enterprises and smaller business sectors. In other words, while microeconomics is studying the problems of price determination and resource allocation, macroeconomics pays attention on economic growth, unemployment and other such fields, which deal directly with economic development of a nation. While microeconomics studies about the taxes and how they effect on the consumer and how interest rates and other government regulations affect the individuals purchasing habits, macroeconomics looks into maintaining the price stability and the exchange rate stability as well. On one hand, microeconomics assists the consumer to identify replacements or the substitutions and the income effects. And macroeconomics, on the other hand, looks into promoting higher employment level in the country.
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