Questions dealing with the difference between microeconomics and macroeconomics are quite common in examinations and interviews. Before we delve into the difference between micro and macro economics, do know that economics deals with how human beings work together to transform limited resources into goods and services, satisfy their wants and distribute the goods and services properly. Macro and microeconomics are the two arms of economics. Through this article we aim to define macroeconomics, define microeconomics, explain the difference between micro and macro economics in tabular form, etc.
Micro vs Macro Economics
|Basis for comparison||Microeconomics||Macroeconomics|
|Definition||This branch of economics deals with the performance and behaviour of individual economic units and variables like a firm, family, consumer, etc.
|This branch of economics deals with the economy at large and lays focus on aggregate variables like poverty, gross income, international income, fiscal policies and so forth.|
|Application in business||Microeconomics theories are applicable to internal and operational issues.||Macroeconomics theories are applicable to environmental and external issues.|
|Scope||Microeconomics deals with various issues such as demand, supply, production, product pricing, factor pricing, economic welfare, consumption, etc.||Macroeconomics deals with issues such as national income, distribution, employment, general price level, money etc.|
|Significance||Microeconomics helps in estimating prices of commodities in relation to various factors of production such as land, labour, entrepreneur, capital, etc. as present in the economy.||Macroeconomics is useful for maintaining stability in the overall price levels in the economy. It holds significance in resolving major economy related issues such as deflation, reflation, inflation, unemployment, poverty and so forth in the whole economy.|
|Restricted to||Microeconomics finds its roots in unrealistic assumptions. For instance, microeconomics assumes that a full employment situation exists in the society; this is untrue and impossible.||In macroeconomics, it has been assessed that the 'Fallacy of Composition' is involved. In some cases, this proves to be untrue as it is possible that what’s proven for aggregate variables may not hold ground for individuals too.|
|Approach||While determining the behaviour of any economy, microeconomics is known to adopt a bottom-up approach.||In macroeconomics, a top-down approach holds prominence and is taken into consideration while dealing with various aggregate variables.|
|Determination of prices||Microeconomics helps in determining the price of any particular commodity in relation to the price of substitute and complementary goods.||Macroeconomics is useful in determining and maintaining the various aspects of the general price level.|
|What does it study?||Microeconomics studies the behavioural patterns of particular markets as well as their related segments in any economy. It deals with consumer behaviour, theory of firms, individual labour markets, etc.||Macroeconomics studies the economy as a whole. It works with aggregate variables like national output, aggregate demand, inflation, etc.|
|Level and scale of performance||In comparison to macroeconomics, microeconomics deals with different areas of economics at a far smaller scale.
|Given the same formulas and principles for solving issues, macroeconomics deals with the study of large-scale economic problems.|
|Theory||Microeconomics is also referred to as the price theory. This is because it defines the process of economic resource allocations on the basis of the relative pricing of different goods and services.||Macroeconomics is also referred to as the income theory. This is because it defines the changing levels of the national income of any defied economy across a period of time.|
|Area of performance||Microeconomics handles the flow of different factors of production that flows from a single owner to the single user of the defined resources.||Macroeconomics handles the circular current of income and expenditure that impacts different sectors of the overall economy.|
|Development of policies||Micro economics helps in the development of policies as well as the appropriate distribution of resources at the firm level.||Macroeconomics helps in the development of policies and the appropriate distribution of resources at the larger economy level; for instance, inflation, unemployment levels and so forth.|
What is Microeconomics?
As per the definition of microeconomics, this branch of economics focuses on the performance metrics and behavioral patterns of individual units. The importance of microeconomics lies in how family, industry, consumers, firms, etc. behave and perform. Demand is of key importance in microeconomics as it determines the price and quantity of a given product in relation to the price and quantity of substitute products and complementary goods. The result is aimed at making judicious decisions with respect to the allocation of limited resources and their alternative uses. Some microeconomics examples include price of a product or service, individual demand, etc.
What is Macroeconomics?
As per the definition of macroeconomics, this branch of economics lays focuses on the performance metrics and behavioral patterns of aggregate variables. Alongside. It concentrates on the issues impacting the economy as a whole. The areas covered by macroeconomics include international, national and regional economies. It deals with unemployment, GDP (Gross Domestic Product), poverty, general price level, imports and exports, globalization, economic growth, monetary and fiscal policies and other areas of the economy. Macroeconomists are proficient in resolving problems related to the economy thereby enabling it to function efficiently. Some macroeconomics examples include national income, aggregate demand and so forth.
Key difference between Microeconomics and Macroeconomics
The following points will help you understand the difference between macroeconomics and microeconomics in a better way.
1. An important point in the study of microeconomics vs macroeconomics is that the former lays focus on specific market segments of the economy whereas the latter concentrates on several market segments and lays focus on the economy as a whole.
2. Another difference between micro and macro economics is that while the former lays stress on individual economic units, the latter concentrates on aggregate economic variables.
3. Microeconomics deals with the issues pertaining to how the price of particular commodities or a single one will affect its demand and supply. Conversely, macroeconomics deals with monetary/ fiscal policies, unemployment, poverty, domestic trade and other important areas of the economy.
We hope that you have gained a fair insight into the meanings of and the difference between micro and macro economics in this article. In case you have any further questions or suggestions with regards to macroeconomics vs microeconomics, do write to us in the Comments section below, we shall revert at the earliest.