School Subjects
Business Accounting and Bookkeeping

Difference between micro economic and macro economic in briefly?

User Avatar
Wiki User
2010-10-25 14:24:27

In brief, the difference is that micro-economists are wrong

about specific things, while macro-economists are wrong about

things in general.

Macro- and microeconomics, and their wide array of underlying

concepts, have been the subject of a great deal of writings. The

field of study is vast; here is a brief summary of what each


Microeconomics is the study of decisions that people and

businesses make regarding the allocation of resources and prices of

goods and services. This means also taking into account taxes and

regulations created by governments. Microeconomics focuses on

supply and demand and other forces that determine price levels for

specific companies in specific industry sectors. For example,

microeconomics would look at how a specific company could maximize

it's production and capacity so it could lower prices and better

compete in its industry.

Macroeconomics, on the other hand, is the field of economics

that studies the behavior of the economy as a whole and not just on

specific companies, but entire industries and economies. This looks

at economy-wide phenomena such as Gross National Product (GDP) and

how it is affected by changes in unemployment, national income,

rate of growth, and price levels. For example, macroeconomics would

look at how an increase/decrease in net exports would affect a

nation's capital account or how GDP would be affected by

unemployment rate.

While these two studies of economics appear to be different,

they are actually interdependent and complement one another since

there are many overlapping issues between the two fields. For

example, increased inflation (macro effect) would cause the price

of raw materials to increase for companies and in turn affect the

end product's price charged to the public.

The bottom line is that microeconomics takes a bottoms-up

approach to analyzing the economy while macroeconomics takes a

top-down approach. Regardless, both micro- and macroeconomics

provide fundamental tools for any finance professional and should

be studied together in order to fully understand how companies

operate and earn revenues and thus, how an entire economy is

managed and sustained. x

Copyright © 2020 Multiply Media, LLC. All Rights Reserved. The material on this site can not be reproduced, distributed, transmitted, cached or otherwise used, except with prior written permission of Multiply.