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What is the difference between microeconomics and macroeconomics? Economics is known to many as a social science that is concerned with production, distribution and end use of products and services. It is an area of study that is divided into two branches, micro- and macro-economics. The term micro refers to smaller phenomena while macro talks about phenomen on a larger scale, hence why in this article you will learn Differences Between Micro and Macro Economics.
As the names imply, while micro-economics traces economy on an individual level, macroeconomics observes nations’ economies and in some instances regional and continental economies. Paramount importance are issues around performance, structure, and future direction, its why one needs to know what is the difference between microeconomics and macroeconomics.
As it is in business, both divisions benefit from each other despite having quite a number of differences, which are our area of focus today. More information on what these two are really about is the biggest illuminator of the Differences Between Micro and Macro Economics we seek.
Micro-economics
This division pays attention to smaller entities like, businesses, families and individuals and the responses they give towards the fluctuating cost of goods and services in an economy. This is reflected by the choices they make as a result of this.
Areas covered by micro-economics, according to vedantu.com, are “Supply and demand for goods in different marketplaces which have been noted from these 10 differences between Micro and Macro Economics.
“Consumer behaviour, as an individual or as a group”
“Demand for service and labour, including individual labour markets, demand, and determinants like the wage of an employee.”
Micro-economics approaches real daily life situations like market experiences as a true reflection of a nation’s economy. This bottom-up approach is the tool used here to determine the whole.
Macro-economics
This is an interaction with a whole nation’s economic activities, from progress to all the processes involved. Policies and other factors that affect the economy as a whole are included in this nature of a study.. as opposed to the former, micro-economics follows a top-down approach, and vedantu.com says it chooses areas like, “The overall economic growth of a country.
“Reasons that are likely to influence unemployment and inflation.
“Fiscal policies that are likely to influence factors like interest rates.
“Effect of globalisation and international trade.
“Reasons that affect varying economic growths among countries.”
What is the difference between microeconomics and macroeconomics?
[Quick Answer] According Adam Smith, Who is father of economics; The field of Economics is divided into two categories: microeconomics and macroeconomics. Microeconomics is the study of individuals behaviour and business decisions, it deals with smaller units of the economy such as consumer behavior, utility, marginal rate of substitution, opportunity cost, demand, prices, etc. While Macroeconomics is the study of the economy as a whole, deals with major components of the economy such as inflation, gross domestic product (GDP). Trick to remember when differentiating the two is that Macro economics looks at the major decisions of countries and governments while Micro economics focuses on smaller activities of the economy.
Top 10 Differences Between Micro and Macro Economics
We have established a basis of differences between Micro and Macro Economics, these two categories through definitions. Now a look at contrasting characteristics will complete the task for this article. Here are the differences between micro- and macro-economics:
1.Areas of study
Micro-economics studies smaller entities and is interested in individual activities. On the other hand macro-economics pays attention to much more significant structures like a nation’s economy and all factors involved around it.
2. Financial aspects to consider
The former focuses on household income, output, price of goods among other factors affecting the smaller unit. Here, the latter is busy thinking of aggregates, among them national output, income, as well as general price levels.
3. Problem areas of concern
Basically micro-economics focuses on the concerns of ordinary citizens which are the general distribution of resources and public funds. Here’s where politics comes to play. In Africa we have seen pressure groups lobbying against discrimination based on political lines.
Developments have seen nations responding to issues of discrimination against the marginalized, women and children as well as the disabled, by including them in different structures of their economies, its one of the major differences between Micro and Macro Economics . This is a result of initiatives devoped under micro-economics.
Its counterpart pays attention to issues around availing employment for citizens as well as increasing revenue for the nation.
4. Range of factors accounted for MICRO-ECONOMICS
In micro-economics small factors like demand, supply and of a particular commodity, against household incomes are issues of account, while macro-economics accounts for issues to do with the demands of the nation’s economy. The comodity being paid attention to by micro-economics sometimes is insignificant to macro-economics.
5. Things needed for an efficient economy
In macro-economics there tends to be focus on goods and services that are needed in a functional and well performing economy. An analysis is done on potential rises in demand for certain goods and services.
Macro-economics on the other hand is in place to offer ideas around means by which resources at the disposal of the country can be fully utilised in order to create stability in the economy.
Unfortunately there is a dark curtain in between these two characteristics which creates anomalies in how effective both should be. Politicians tend to use the former in their campaigns to gain support yet on the other hand looting more meaningful resources meant for the public.
6. Focuses of balance
Micro-economics looks at the equality of units that make up the whole. That is small scale equilibrium.
Here Macro-economics will be concerned about the income of the nations against equilibrium in levels of employment.
7. Approach to income
Price variations and income levels are matters of concern in micro-economics yet income is the main facet of macro-economic problems.
8. Limitations
Micro-economics has been accused of unrealistic assumptions like the presence of full employment in society which can never be practical.
The reflections of the aggregate are not always true for individuals too yet macro-economics treats this phenomena in such a manner that regards them to be the same.
9. Competition
In micro-economics competion is not an issue of concern in the market. Instead it gives consumers a variety of players to choose from and helps them beat certain price hikes. On the other hand What is the difference between microeconomics and macroeconomics, can be noted in market competition can be a tool for economic growth for the nation. There is focus on lawful distribution of resources and competition is undesirable in this regard.
10. Meaning
As I mentioned earlier, macro-economics is defined as the facet under economics that places attention on individual consumer behaviors, firm orfamily is known as Microeconomics. Its counterpart holds discussions around the entire economy, not only of the nation but also international.
I am not an economist but as a businessman, I have realised that almost every aspect of trade has two approaches and it is important to be informed on both differences between Micro and Macro Economics . This article helps you to play around with both facest such that they are interdependent for the benefit of your company.