Microeconomics focuses on issues that affect individuals and companies. These two terms can be called as opposite to each other. Designed for new economics students, this in-depth course is an excellent introduction to macro and micro economics. Macroeconomics is a vast field, which concentrates on two areas, increasing economic growth and changes in the national income. The bottom line is that microeconomics takes a bottoms-up approach to analyzing the economy while macroeconomics takes a top-down approach. But macroeconomics uses the technique of general equilibrium analysis that studies aggregate economic variables and their interrelations.
Microeconomics is concerned with issues such as the impact of an increase in demand for cars. Business administrators tend to focus on microeconomics and place less focus on macroeconomics. This is true with micro and macroeconomics, micro and macro evolution, microorganism, micro lens and macro lens, micro finance and macro finance, and so on. It was Harrod and Domar who extended the Keynesian analysis to the long-run problem of growth with stability. Public sector accounts for about two-thirds of the total employment in the organised industrial sector in India.
But the objectives of macroeconomics are full employment, price stability, economic growth, favourable balance of payments etc. The main differences are: 1. According to this theory, an individual entrepreneur in his investment activity is governed by the expected rate of profit on the one hand and rate of interest on the other. Examples of macroeconomic issues While microeconomics focuses on the effects a certain decision has on individuals and businesses, macroeconomics looks at the bigger picture. Some have predominant white and less black.
That is, they attempt to meet demand without creating too great a supply. On the other hand, Macroeconomics deals with aggregate of these quantities, not with individual incomes but with the national income, not with individual prices but with the price level, not with individual output but with the national output. This is called microfundation of a macroeconomic model. Modem economy is so complex that a central planning authority will find it too difficult to get all the information required for the optimum allocation of resources and to give directions to thousands of production units with various peculiar problems of their own so as to ensure efficiency in the use of resources. According to Keynes, cost of production rises because of 1 the law of diminishing returns operates and 2 wages and prices of raw materials may rise as the economy approaches full-employment level. Microeconomics examines the economy as a whole, so to say microscopically, that is, it analyses the behaviour of individual economic units of the economy, their inter-relationships and equilibrium adjustment to each other which determine the allocation of resources in the society. Since inflation raises the price of goods, services and commodities, it has serious effects for individuals and businesses.
The problem of growth is a long-run problem and Keynes did not deal with it. Learn more about intelligent decision making in our course. Thus, we have microfinance where the focus is upon the monetary needs and requirements of a single individual where there is also macro finance where financing by the banks or other financial institutions is of very large nature. But this is not correct. It is a study of individuals or groups. Similarly, there are many systems whose examples we can give, but the main difference being the difference in their proportion.
These forces help to determine the equilibrium price in the market. For example individual consumers you and I may like to know what employment conditions will be like next year. Inflation measures the annual % change in the aggregate price level. Macro economics is the study of aggregates like national income, total employment, aggregate demand, aggregate supply, etc. It also focuses on entire markets of goods and services like sugar, prescription drugs, and telephones. An example of a microeconomic issue could be the effects of raising wages within a business.
Other macroeconomic decisions, such as the creation of a minimum wage or tariffs for certain goods and materials, have significant microeconomic effects. It should be noted that we are able to derive aggregate investment function and aggregate consumption function from individual functions because in this respect the behaviour of the aggregate is in no way different from the behaviour patterns of individual components. There may be some disagreement between particularly value investors and technical investors about the proper role of economic analysis, but it is more likely that microeconomics will affect an individual investment proposal. But macroeconomics seeks practical understanding of an economy. I would be able to maintain the price of each banana and not allow any gap in the market to appear for others to exploit.
On the other hand, macroeconomics studies similar concepts, but with a broader approach. Another field of study that makes use of micro and macro is economics. Efficiency in consumption consists of distributing the given amount of produced goods and services among millions of the people for consumption in such a way as to maximise the total satisfaction of the society. These two economies are mutually dependent, and together, they develop the strategy for the overall growth of an organization. Therefore, macroeconomics is also known as aggregative economics. . Governments turn to macroeconomics to help them calculate projected tax revenue, interest rates or inflation which, in turn, will influence their economic policy.
Macro- and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. Keynes produced his The General Theory of Employment, Interest and Money; this examined why the depression was lasting so long. Efficiency in production involves producing the maximum possible amount of various goods from the given available amount of resources. General equilibrium analysis is the microscopic examination of the inter-relationships of parts within the economy as a whole. Thus, both the micro and macro economics approach should be integrated to make a correct assessment of any economic problem. An important aspect of this economy, is also to examine market failure, i.
So it is macroeconomics when economists choose to concentrate upon the state of the economy in a nation whereas the study of a single market or industry remains within the realms of microeconomics. Thus the legs got elongated and toes reduced. Microeconomics assumes full employment, optimum allocation of total resources and general price level as given. For example it could include the possible outcome of elections and their effect on economic policy, the use of instruments like , future commodity prices and the economic effect of conflict or natural disasters and so on. Summary Micro and macro are derived from Greek language where micro means small and macro refers to large. Economist tend to specialize either on microeconomics or on macroeconomics.