Micro and Macro Economics

 

 

 

S.No. Basis Micro Macro
1. Study Individual Economy as whole
2. Deal With Individual Units Aggregate Units
3. Tools Demand & Supply of particular commodities Aggregate Demand and Aggregate Supply of Economy as whole
4. Central Problem Price Determination of commodities or factor of production Determine level of income and employment
5. Prices Relative Prices Decide Absolute price decide
6. Type of Analysis Practical equi analysis General equi analysis
7. Scope Narrow Wider
8. Understanding Easier Complex

 

 

 

 

MICRO-ECONOMIC ANALYSIS

 

The subject matter of economics consists of two parts, namely Micro economics and Macro economics. Ragnar Frisch. Who is among the first Nobel laureates in Economics coined these term. Which are now universally used. “Micro” is derived from the Greek word “Mikros” meaning small and “Macro” from “Makros” meaning large.

In Micro–Economics we study the economic behaviour of an individual, firm or industry in the national economy. It is thus a study of a particular unit rather than all the units combined. We mainly study the following in Micro-Economics:

 

(i) Product pricing;

(ii) Consumer behaviour

iii) Factor pricing;

iv) Economic conditions of a section of the people;

(v) Study of firms; and

(vi) Location of a industry.

 

According to K.E. Boulding, “Micro economics is the study of particular firms, particular households, individual prices, wages, incomes, individual industries, particular commodities”.

Thus, it deals with the analysis of small individual units of the economy such as individual consumers, firms and small groups of individual units such as various industries and markets; it is a microscopic study of the economy.

Herein it should be emphasized that it does not study the economy in its totality. It looks at the economy through a microscope, to analyse how the millions of units in the economy (analogous to cells in any organism) play their part in the functioning of the entire economic organisation.

To quote Prof.Mc.Connel, “Micro Economics is concerned with specific economic units and a detailed consideration of the behavior of these individual units. In Micro Economics, we examine the trees, not the forest. Micro Economics is useful in achieving a worm’s-eye view of some very specific component of our economic system’’.

 

MACRO ECONOMIC ANALYSIS

Macroeconomics is the study of aggregates; hence called Aggregative Economics. It is the analysis of the entire economic system, the overall conditions of an economy like total investment and total production. In the words of K.E.Boulding, “Macroeconomics deals not with individual quantities as such but with aggregates of these quantities; not with individual incomes, but with the national income; not with individual prices but with the price levels; not with individual outputs but with the national output.”

It analyses the entire economy and its large aggregates like total national income and output, aggregate consumption, saving and investment and total employment.

 

In Macro-Economics, we study the economic behaviour of the large aggregates

such as the overall conditions of the economy such as total production, total consumption,

total saving and total investment in it. It is the study of overall economic phenomena as a

whole rather than its individual parts. It includes:

 

(i) National income and output;

(ii) General price level;

(iii) Balance of trade and payments;

(iv) External value of money;

(v) Saving and investment; and

(vi) Employment and economic growth.

 

Thus, when we study why we continue to have balance of payments deficits, or

why the value of rupee vis-a-vis dollar is falling or why saving rates are high or low in a

particular country we are studying Macro-Economics.

 

In the view of Prof. Mc. Connel, ” The level of Macroeconomics is concerned

either with the economy as a whole or with the basic sub-divisions or aggregates such as

governments, households and businesses which make up the economy In short,

macroeconomics examines the forest, not the trees. It gives us a bird’s-eye view of the

economy”. It deals with the great averages and aggregates of the system rather than with

particular units composing it.

 

 

 

 

 

 

References

http://www.investopedia.com/ask/answers/110.asp

http://en.wikipedia.org/wiki/Macroeconomics

https://www.mint.com/the-difference-between-macro-and-microeconomics/

http://www.economicshelp.org/blog/6796/economics/difference-between-microeconomics-and-macroeconomics/

http://www.brownconsultancy.com/ds-micro-macro-economics.aspx

http://www.imf.org/external/pubs/ft/fandd/basics/bigsmall.htm

 

 

 

Registration


A password will be e-mailed to you.

Feedback Form

Name (required)

Email (required)

Feedback