Concept of Micro and Macro Economics
Concept of Micro and Macro Economics.
Economics is divided into two categories one is macroeconomics and another is microeconomics.
Macroeconomics studies aggregate output, employment, and the general price level. Microeconomics studies the economic behavior of individual decision makers like resource owners,consumers, and business firms.
Concept of Microeconomics
Micro means millionth part. When we talk about microeconomics, we mean some small part of the whole economy. For example, if we study individual economic agent such as a consumer or firm, it is a micro approach.
If it is an analysis of price, it is of a commodity or factor of production, not the general price level. In case of demand analysis, it is a demand for particular commodity or service of a firm/industry, not aggregate demand for whole economy.
Thus, microeconomics deals with the behavior of individual decision making units. Full employment is one of the important feature of microeconomics is , that is why economic problem in micro approach lies in resource allocation or in price determination. Therefore, it is called as “Price theory”. Concept of Micro and Macro Economics.
Concept of Macroeconomics
Macroeconomics is concerned with the aggregates and average of entire economy such as national income, aggregate demand and supply, full employment, aggregate consumption, saving, investment, general price and inflation. In it we study how these aggregates and averages are determined and what causes fluctuations in them. It also deals with how an economy grows and develop.
Macro approach is not a mere aggregation of micro approach. It is quite different and far more complicated than summation and multiplication. For example let us consider the case of saving. In times of depression, saving by an individual is beneficial, while saving by the economy will definitely deepen the depression further.