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Microeconomics Macroeconomics Meaning

The document compares microeconomics and macroeconomics. Microeconomics studies individual units like consumers and firms and issues like supply and demand. Macroeconomics studies whole economies and national issues like GDP, unemployment, and inflation.

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41 views3 pages

Microeconomics Macroeconomics Meaning

The document compares microeconomics and macroeconomics. Microeconomics studies individual units like consumers and firms and issues like supply and demand. Macroeconomics studies whole economies and national issues like GDP, unemployment, and inflation.

Uploaded by

sanyajaswal2003
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Microeconomics Macroeconomics

Meaning

Microeconomics is the branch of Macroeconomics is the branch of


Economics that is related to the study of Economics that deals with the study of the
individual, household and firm’s behaviour and performance of the economy
behaviour in decision making and in total. The most important factors studied
allocation of the resources. It comprises in macroeconomics involve gross domestic
markets of goods and services and deals product (GDP), unemployment, inflation
with economic issues. and growth rate etc.

Area of study

Macroeconomics studies the whole


Microeconomics studies the particular
economy, that covers several market
market segment of the economy
segments

Deals with

Macroeconomics deals with various


Microeconomics deals with various issues
issues like national income, distribution,
like demand, supply, factor pricing,
employment, general price level, money,
product pricing, economic welfare,
and more.
production, consumption, and more.

Business Application

It is applied to environmental and external


It is applied to internal issues.
issues.

Scope

It covers several issues like demand,


It covers several issues like distribution,
supply, factor pricing, product pricing,
national income, employment, money,
economic welfare, production,
general price level, and more.
consumption, and more.
Significance

It is useful in regulating the prices of It perpetuates firmness in the broad price


a product alongside the prices of level, and solves the major issues of the
factors of production (labour, land, economy like deflation, inflation, rising
entrepreneur, capital, and more) prices (reflation), unemployment, and
within the economy. poverty as a whole.

Micro means a small part of a thing. Microeconomics thus deals with a small part
of the national economy. It studies the economic actions and behaviour of
individual units such as an individual consumer, individual producer or a firm, the
price of a particular commodity or a factor, etc.

Theory of Product Pricing :


The price of an individual commodity is determined by the market forces of
demand and supply. Microeconomics is concerned with demand analysis i.e.
individual consumer behaviour, and supply analysis i.e. individual producer
behaviour.

(b) Theory of Factor Pricing :


In Microeconomics, land, labour, capital and entrepreneur are the factors that
contribute to the production process. Microeconomics helps in determining the
factor rewards for land, labour, capital, and entrepreneur in the form of rent,
wages, interest, and profit respectively.

(c) Theory of Economic Welfare :


Theory of Welfare basically deals with efficiency in the allocation of resources.
Efficiency in the allocation of resources is attained when it results in the
maximization of satisfaction of the people. Economic efficiency involves three
efficiencies :

• Efficiency in production: Efficiency in production means producing a maximum


possible amount of goods and services from the given amount of resources.
Thus, the focus of microeconomics is mainly confined to price theory and resource
allocation. It does not study the aggregates relating to the whole economy. This
approach does not study national economic problems such as unemployment,
poverty, inequality of income etc. Theory of growth, theory of business cycles,
monetary and fiscal policies etc. are beyond the limits of microeconomics
Efficiency in consumption: Efficiency in consumption means distribution of
produced goods and services among the people for consumption in such a way as
to maximize total satisfaction of the society.
• Overall economic efficiency: It means the production of those goods which are
most desired by the people.
Thus, the focus of microeconomics is mainly confined to price theory and resource
allocation. It does not study the aggregates relating to the whole economy. This
approach does not study national economic problems such as unemployment,
poverty, inequality of income etc. Theory of growth, theory of business cycles,
monetary and fiscal policies etc. are beyond the limits of microeconomics

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