What is the similarities of micro and macro environment? In the previous article we ascertained the definition of economics as a whole, where we discovered it is a social science that is concerned with production, distribution and consumption of products and services, now we dive into similarities of microeconomics and macroeconomics environment. This social science is divided into two facets which show differences and similarities of micro and macro environmentand we looked at how these are different from each other.
However, these differences should never close our eyes to the interdependency that exists between these two facets. Stronger economies are those that make use of the contributions of one facet in the other from similarities of microeconomics and macroeconomics. Treating the two as competing phenomena is a disservice to what economics as a whole tries to achieve.
This leaves me in a position where discussing the similarities between micro- and macro-economics is beyond just giving out knowledge but also an important tool of trying to unify ideas to come up with smarter economic solutions.
The term micro refers to smaller phenomena while macro talks about phenomen on a larger scale. 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.
ALSO READ: Differences Between Micro and Macro Economics
What is the similarities of microeconomics and macroeconomics? the paramount importance are issues around performance, structure, and future direction.
What is the similarities of microeconomics and macroeconomics?
As it is in business, both divisions benefit from each other despite having quite a number of differences, which are not our area of interest today. Let us interact with the similarities in these facets and evaluate what is the similarities of microeconomics and macroeconomics?
1.The two borrow principles from each other
It is inevitable for the two to exist in isolation from each other. The whe is made up of units and as such, we see macro-economics borrowing micro principles. An example by Suryakumar Yadav best describes this relationship, “If you study impact of devaluation, you are likely to use same economic principles, such as the elasticity of demand to changes in price.”
2. The two have effects on each other.
Despite most people being unaware of these two fundamentals, a few of their components causes instant changes to their counterparts under the responding category. In Africa, similarities of microeconomics and macroeconomics even as little kids before we even thought of the term economy, we always experienced situations where rises in oil prices instantly had significant impacts on inflation.
3. Certain phenomena exist in both categories.
This has been termed “blurring of distinction.” Economics is not the first area of study to have characteristics in one category being prevalent in one or more categories under the same subject matter. Macro-economic trends involve entities like companies, which also trade directly with individuals and other companies.
Here’s another example, “If house prices rise, this is a micro economic effect for housing market. But, housing market is so influential that it could also be considered a macro-economic variable, and will influence monetary policy.”
4. Micro-economic components are used to forecast the future of macro-economics
Ofcourse macro-economics exist because of micro-economics. Decisions made in the former has long term effects on the latter and the other way round. Economists have seen this and have been trying all sorts of ideas to strike a balance such that there is not much contradiction of principles. Similarities of micro and macro environment has even gotten to the employment of technogy in efforts to use “computer models of household behaviour to predict impact on macro economy.”
5. Both are categories under Economics
One common attribute among social sciences is their agreement and drive towards the well being of mankind. Economics exists in order to control resources such that societies can access comodities and services they need to survive. Differences in approach do not mean disagreement on similarities of microeconomics and macroeconomics. They are simply means from which Economists try to tackle man’s daily economical challenges.
However, politicians have been in the business of sensetionalizing the two against each other for political agendas. Micro-economics quickly appeals to the less informed lad who’s decisions are driven mostly by his tummy.
6. Concerns under micro-economics respond directly to taxes.
Taxation is a key component in macro-economics. Government’s main source of income are taxes paid by citizens and businesses through their various transactions. An increase or downward adjustment of taxes has direct impact on prices of products and services.
7. Macro-economic goals are translated in the variables of micro-economics
Macro-economics has three main goals despite involving complicated jargon processes and priorities. Better living standards for citizens, reduction of unemployment and low inflation are the macro goals. It needs no book to see these are the daily concerns of individuals and families. Low inflation also benefits businesses, giving the capacity to employ more people who are individuals coming from families.
8. Tools used in macro-economics determine the micro-economic components
To achieve the afore mentioned goals, macro-economics uses monetary and fiscal policies. Monetary policy refers to the control of how much money is made available in an economy and means by which new money is introduced. Monetary policies have everything to do with supply and demand of products and services, prices among other characteristics in micro-economics.
Monetary policies also have effects on bank lending, interest rates, and financial capital markets. A nation’s central bank is responsible for coming up with monetary policies which are reviewed over a period of time depending on the principles set by the respective finance ministry.
Fiscal policy by definition, is the means by which government regulates its spending through the legislature ministry. There is also adjustment on taxes which affects micro-economics.
9. Both micro-economics and macro-economics are affected by national budgets.
National budgets determine how components of both phenomena will respond. An example is government’s budget allocation towards health care delivery. This will have an effect on the cost of accessing health care services. This is one of the main concerns among others in micro-economics.
10. Both directly deal with companies whether big or small.
Businesses are affected by the determinants of both micro and macroeconomic fundamentals. We can call them the translator of macro-economic language, breaking it down into micro-economic terms in similarities of micro and macro environment. This is how most societies can get to have an appreciation of economic developments in the country.
Economics is a very important social science for emerging business owners. Understanding how macro-economic trends will impact your business from expansion to trough prepares you for the highs and lows of trade hence why you must know Similarities of micro and macro environment.
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