What are the major differences between micro-economics and macro-economics?

Answer 1

The term micro is derived from Greek word 'mikros' meaning 'small' and the term macro is derived from the Greek word 'makros' meaning 'large'.

Thus, Micro economics studies the economic behaviour of individual decision making units such as consumers, resource owners and business firms. It makes a microscopic study o the economy.

Whereas, Macro economics is concerned with the analysis of the behaviour of the whole economy. It deals with those aggregates which relate to the whole economy like total consumption, total investment, total savings, etc.

Microeconomics is the study of small part of the whole economy. It deals with particular firms, household, individual, prices wages, incomes, individuals, industries, particular commodities.

On the other hand the word Macro means large in scope, and explains the bigger picture, or universal.

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 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.

Macro economics is the study of an entire national economy, or an international economy. It is what is usually meant by the term economics. Micro economics is the application of economic theory to a smaller economic system such as a single family or business.

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 covers: