Micro vs Macro Economics
The difference between Micro and Macro Economics lies in the fact that While microeconomics analyzes small firms and individuals, macroeconomics analyzes the economic issues as a whole. Microeconomics deals with demand and supply whereas macroeconomics deals with the productive capacity of the economy.
Microeconomics studies the income of an individual whereas macroeconomics studies about the national income.
Comparison Table Between Microeconomics and Macroeconomics
|Parameter of Comparison||Microeconomics||Macroeconomics|
|Scope||Microeconomics concerns itself decisions of individuals and business decisions.||Macroeconomics, on the other hand, analyzes the decisions that are made by countries and governments.|
|Approach||Microeconomics adopts a bottom-up approach. It focuses on the demand and the supply and several other forces that play out in the price levels.||Macroeconomics adopts a top-down approach. Thus, it looks into the policies and decisions that influence the direction taken by other players in the economy.|
|Impacts||Any deductions drawn from microeconomics has a rather smaller sphere of influence. It mainly impacts the household level.||The deductions drawn from macroeconomics are however far-reaching. They determine the direction that the entire economy takes thereafter.|
|Applicability||The key beneficiaries of the microeconomics concepts are investors and members of the households.||As for macroeconomics, policymakers and larger corporations are the ones that gain a lot.|
|Key Concepts||Some of the main terms used in microeconomics are consumption, income, household, and markets.||As for the Macroeconomics, the main concepts applicable are taxation, GDP, economic growth rates, and employment, among others.|
What is Microeconomics?
Microeconomics engages in the study of the behaviors of individuals, firms, and households in a given area with regards to how they ‘make both ends meet.’ This branch typically touches on the marketing of goods and services and how individuals cope with their economic issues.
As part of its study, it also endeavors to look into economic tendencies and how they vary in response to how individuals and corporate entities respond to any changes in the factors of production.
For the effective study, all the players are divided into business owners, sellers, and buyers.
What is Macroeconomics?
Macroeconomics, on the other hand, looks at the economy in its entirety. It examines how the various forces interact and engage at a larger level like the region, the nation, and the entire globe. On the whole, it examines the four core areas namely price stability, economic growth rates, full employment, and an equilibrium balance of payment.
While doing all these, the study endeavors to look into the aggregate changes that transpire in the economy with regards to inflation, gross domestic product, economic growth rates, and unemployment. Specifically, the branch of economics endeavors to ascertain how the affected entities respond to these fluctuations.
Main Differences Between Microeconomics and Macroeconomics
Microeconomics is mainly concerned with households and businesses. Macroeconomics, on the other hand, lays much of its focus on the larger entities that drive and economies like the government, banks, and other large scale private entities.
Thus, the former could as well be a subset of the latter.
Microeconomics mainly involves the study of the markets and how the individuals and firms leverage it for the sake of meeting their own needs and wants. Microeconomics on the other hand mainly focuses on the policies and fiscal steps that are implemented at the national level.
The main concern of microeconomics is the small scale, business, and the day to day consumers and how they meet their needs. As for macroeconomics, it is mainly preoccupied with the sum total activities that influence economic productivity and consumption in a given entity.
Thus it looks into unemployment, inflation and growth aspects thereof.
This describes the approach that these two disciplines employ to carry out their purposes. Microeconomics uses simple observations to tale notes and make recommendations of the best ways forwards.
Macroeconomics, on the other hand, employs complex analytic tools to study and draw conclusions from the data they come across.
In all microeconomics is mainly descriptive in the sense that it merely studies and draws observations. Under some exceptional circumstances, it also recommends the approaches to take to improve the system.
Macroeconomics, however, endeavors to remedy any issues that may exist in the economy. As such, its findings are largely curative and full of policy recommendations.
In the course of undertaking these two studies, both fields base their undertakings on various arguments and premises. Microeconomics assumes that business people are well-informed, rational, and produce their goods with the aim of maximizing profits.
Macroeconomics, on the other hand, assumes that all forces will get to an equilibrium that is beneficial to all the players in the economy.
The key areas of microeconomics are demand, supply, elasticities, competition, and production costs. Some of the most noticeable aspects of macroeconomics are national output and income, international economics, aggregate demand and supply, general price levels.
Generally speaking, marketing survey firms, small scale businesses, and would-be investors are the ones that utilize the microeconomic concepts. Large scale businesses, multinational corporations, banks, and foreign investors are the key consumers and drivers of macroeconomics.
The studies and findings of microeconomics are only relevant to the localities involved and impacted by the study. Almost no other person may derive meaning from the findings of the research. Macroeconomics tends to be widely applicable. The research findings are useful for many people and in many areas besides the local community.
Frequently Asked Questions (FAQ) About Micro and Macro Economics
What are the three main concepts of Microeconomics?
Microeconomics is the branch of economics that deals with the study of the behavior of individuals and firms and the interaction between them.
The study is about the behavior and decisions that affect the distribution of scarce resources.
There are several concepts of microeconomics. The three main ones are:
- Production theory – It is the study of production where producers try different methods to reduce the cost of production and increase the profit.
- Utility theory – This theory depends on consumers where consumers decide to purchase goods that they think would increase their happiness or utility.
- Price theory – Production theory and utility theory together determine the theory of supply and demand or price theory. This theory determines the price of a product in the market.
Who is the father of Microeconomics and Macroeconomics?
There are two great economists who are considered as the father of micro and macroeconomics. The first one is Adam Smith who is regarded as the father of microeconomics.
Second is John Maynard Keynes [pronounced as ‘Cairns’] who is regarded as the father of macroeconomics.
Are taxes Micro or Macro Economics?
Microeconomics focuses more on individuals and firms. It also includes focusing on the taxes they are paying. Hence, taxes can be considered as microeconomics.
Give examples of Micro and Macro Economics?
Microeconomics deals with the study of small businesses and individuals.
Some examples are:
- Studying the cost of production of goods and revenue generated after selling the same goods.
- Determine the cost of the product and revenue generated with it.
- Study supply and demand for goods.
- Study utility of a consumer’s satisfaction.
Macroeconomics studies the problems of an economy as a whole and do not focus on each and every individual or small business.
Some fine examples of macroeconomics are:
- The study of GDP, PPP, NNP, etc because these factors determine the national income of an entire country and not just one individual.
- Study of inflation and deflation and try to figure out means to control them.
- Study demand and supply on a national scale.
- Employment and unemployment rate in a country.
- Government expenses and income.
- Money supply and interest rates.
Having belabored these two terms, we are now confident that you have what it takes to distinguish clearly between the two of them. Go ahead now to make good use of them. Could it be that there are issues you still do not comprehend? Kindly let us know. We are always eager to offer additional explanations.
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