Microeconomics Vs Macroeconomics

Posted by on Dec 13, 2016

Microeconomics Vs Macroeconomics

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Microeconomics

• The word ‘micro’ is derived from the Greek word ‘mikros’ which means ‘small.’

• It is the study of economics at an individual, group or company level.

• The central problem is price determination and allocation of resources.
• Price is the primary determinant of macroeconomic problems.

• It covers various issues like supply, demand, product pricing, consumption, production, economic welfare, etc.

• It takes a bottom-up approach to analyzing the economy

• Partial equilibrium method is used in microeconomics

• It deals with individual economic variables

• It consists of individual entities

• It solves the central problem of how, what and for whom to produce in the economy

• Applications: Used to determine methods of improvement for individual business entities.

• Careers: Economist, Researcher, Professor, financial advisor, and more.

• Pros: It depends on a free enterprise economy; i.e., the company is independent to take decisions.

• Cons: It only analyses a small part of an economy while a bigger part is left untouched.

Macroeconomics

• The word ‘macro’ is derived from the Greek word ‘makros’ which means ‘large.’

• It is the study of a national economy as a whole

• Its central problem is a determination of the level of income and employment.

• Income is the primary determinant of Macroeconomic problems.

• It covers various issues like national income, distribution, employment, general price level, money, etc.

• It takes a top-down approach to analyzing the economy

• General equilibrium method is used in macroeconomics

• It deals with aggregate economic variables

• The foundation of macroeconomics is microeconomics

• It solves the central problem of full employment of resources in the economy.

• Applications: Used to determine an economy’s overall health, the standard of living, and needs for improvement.

• Careers: Economist, Professor, Researcher, Financial Advisor and more.

• Pros: It is helpful in determining the BOP (balance of payments) along with the causes of deficit and surplus of it.

• Cons: Its analysis states that the aggregates are homogeneous, but occasionally they are heterogeneous.

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