Difference between Micro and Macro Economics

By K Balaji|Updated : September 26th, 2022

The study of economics is divided into two branches - Micro economics and Macro economics. While Microeconomics refers to the analysis of distribution, production, and consumption of services and goods at a personal, company, or group level, Macroeconomics is the analysis of a national economy on a bigger scale. Learning the difference between micro and macro economics will help the students to understand about each in detail.

Economics refers to the analysis of how people, companies, and states choose to allot resources to fulfill their requirements. These groups decide how the resources are managed and corresponded to accomplish the highest output. Keep reading the article to read more about the difference between Microeconomics and Macroeconomics.

Difference Between Micro and Macro Economics

Get the difference between Microeconomics and Macroeconomics in a tabular form here. This comparison is made on the basis of various factors, such as the central approach to solve problems, uses, definitions, etc.

Difference Between Macro and Micro Economics PDF

Basis

Macroeconomics

Microeconomics

Definition

It strives to examine the economy as a whole and comprises diverse market segments.

Concentrating on a personal level, Microeconomics studies a detailed market segment in a country's economy.

Central Approach

Takes a comprehensive approach by examining the whole economy.

It is an individual-centric practice as it is concerned with companies and families and studies customer behavior, resource distribution, and human preferences.

Concerned with

Also known as the income theory because it represents the changing groups of nationwide revenue of an economy during a specific time.

Also known as the price theory, it deals with factor pricing such as interest, rent, wage, profits, etc. for land, capital, labor, and company and explains how diverse prices are fixed.

Uses

It is an analytical tool used to craft fiscal and national economic policy.

It can be used by potential investors to make their decisions.

Factors

National income, distribution, employment, GDP, general price level, money, etc.,

Demand, factor pricing, supply, product pricing, production, consumption, economic welfare, etc.

What is Microeconomics?

Microeconomics refers to a fundamental branch of economics that examines the behaviour of people and companies. Further, it concentrates on how conclusions are made based on the distribution of finite resources. It explores the demand and supply pattern and determines outcomes and costs in individual markets.

Below are some key components of Microeconomics:

  • Production theory: This hypothesis proposes the study of how services and goods are manufactured or assembled.
  • Demand, Equilibrium, and Supply: Prices are determined by the regulations of supply and demand. Under this process, vendors give the same rate or cost as required by customers or buyers in a completely competitive industry. It creates an economic equilibrium between supply and demand.
  • Production costs: This regulation defines the cost of goods and services specified by the cost of the supplies employed during the production stage.

What is Macroeconomics?

'Macro' emanates from the Greek phrase 'Makro' (meaning "enormous"). When combined with economics, this unit deals with the performance, production, behaviour, design, and decision-making of a country's economy as a blend of all commodities rather than individual companies or markets.

Mentioned hereunder are some key components of Macroeconomics:

  • Gross Domestic Product (GDP): Being one of the principal indicators, GDP (Gross Domestic Product) is employed to measure the strength of a country's economy. GDP is the monetary value of all the finished services and goods rendered within a nation's borders.
  • National Income: It is a financial indicator that defines the accurate portrayal of the economy and buying capacity of individuals in the country. It means the sum of earnings, salaries, pension payments, and interest rents to citizens of the country.
  • Unemployment: This aspect describes the measurement of unemployment of individuals in the nation, and the price at which individuals look for employment or jobs is the unemployment rate.

Summary:

The key difference between Microeconomics and Macroeconomics is that the former deals with the supply and demand of goods, and individual decisions related to production, consumption, and utility, while the latter deals with the economy as a whole by making predictions about the national income, formulating policies, etc.

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FAQs on Difference between Microeconomics and Macroeconomics

  • The basic difference between Microeconomics and Macroeconomics is that while Microeconomics refers to the analysis of economics at a personal, company, or group level, macroeconomics is the analysis of a national economy.

  • There are several criteria to differentiate between micro and macro economics, such as definition, factors, central approach, uses, purpose, coverage, etc. For example, Microeconomics covers the analysis of individual’s decision making, supply, and demand of products, etc., and Macroeconomics studies the economy on a national level as a whole.

  • Microeconomics and Macroeconomics are the two branches that cover the study of economics in total. When Microeconomics covers planning and decision-making on an individual or business level, Macroeconomics studies the impact of such decisions and plans on the country.

  • The difference between Macroeconomics and Microeconomics in terms of factors is as follows:

    • National income, distribution, employment, GDP, general price level, money, etc., are factors of microeconomics.
    • On the other hand, Demand, factor pricing, supply, product pricing, production, consumption, economic welfare, etc., are factors of macroeconomics.
  • Professor Ragnar Frisch first used the term Microeconomics, and the term Macroeconomics was invented by John Maynard Keynes.

  • The difference between Micro and Macro economics based on the central approach is as follows:

    • Macroeconomics takes a comprehensive approach by examining the whole economy.
    • On the contrary, Microeconomics is an individual-centric practice as it is concerned with companies and families and studies customer behaviour, resource distribution, and human preferences.

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