Written by There are two branches of economics, namely; microeconomics and macroeconomics.
While microeconomics focuses on individual actors and their decision-making, macroeconomics takes a big-picture view of the entire economy.
In this post, we will define microeconomics and macroeconomics. Then, we will then differentiate between the two.
Microeconomics
Microeconomics is the study of individual economic behavior at the level of households, firms, and markets.
It is the branch of economics that deals with the economic behavior of small economic agents.
It examines how individuals and firms make decisions about the production, consumption, and distribution of goods and services.
Microeconomics deals with the behavior of individual economic units, like households and firms.
It studies how small-scale economic agents make decisions and allocate their limited resources.
Key topics under microeconomics include the theory of demand and supply, the theory of consumer behavior, welfare economics, and the theory of the firm, production, and costs.
Macroeconomics
Macroeconomics is the study of the economy as a whole. It examines the overall performance and behavior of the economy.
As a branch of economics, macroeconomics deals with the economic behavior of the whole of economics.
It examines economy-wide phenomena such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment.
Macroeconomics deals with large-scale economic activities, such as those of the national or global economy.
Topics studied under macroeconomics include inflation, national earnings, unemployment, international trade, the balance of payment, and foreign exchange market
Difference Between Microeconomics and Macroeconomics
1. Microeconomics studies the behavior of individual consumers, firms, and industries, while macroeconomics studies the behavior of the economy as a whole.
2. Macroeconomics examines several market segments of the economy, while microeconomics examines a single market segment.
3. Microeconomics is concerned with the determination of price. Therefore, it is also called the theory of price.
In contrast, macroeconomics mainly deals with aggregate output and unemployment. As a result, it is called the “theory of income”.
4. Microeconomics studies variables such as prices, output, and demand for individual goods and services, while macroeconomics studies variables such as inflation, unemployment, and economic growth.
5. While macroeconomics focuses on the price level of the national economy, microeconomics deals with individual and market prices.
6. In microeconomics, we study individual and market demand and supply, while in macroeconomics we study aggregate demand and supply.
Tabular Comparisons of Microeconomics and Macroeconomics
| Features | Microeconomics | Macroeconomics |
|---|---|---|
| Scope of study | It studies small scale economic agents like households and firms | It studies large scale economic agents like the national economy and the global economy |
| variable analyze | Microeconomics studies individual demand and supply | Macroeconomics studies aggregate demand and supply. |
| Alias | Also called Price theory | Also called theory of income and employment |
| Focus on economic decisions of | individual and household | countries and global economy |
| scale of prices study | Microeconomic studies the individual and market prices | Macroeconomics deals with the aggregate price level in the economy |
| Simplicity of analysis | Microeconomic analyses are very simple because it deals with small scale economic agents. | Macroeconomic analysis are very complex because it deals with large scale economic agents. |
In conclusion, microeconomics deals with the behavior of individual economic agents and how they interact in specific markets, while macroeconomics deals with the overall performance and behavior of the entire economy.
