MICROECONOMICS VS. MACROECONOMICS – The Difference Between The Two
MICROECONOMICS VS. MACROECONOMICS – In this topic, we will now talk about the difference of two things: microeconomics vs. macroeconomics.
Microeconomics and macroeconomics are basically two sides of the same coin, which is economics. So let’s start by knowing the definition of economics.
Economics
It is one of the branches of social science which deals with production, distribution, and consumption of goods and services. Economics also studies the behavior, interactions, and relations of an economics agent and how it works.
It is derived from the two Greek words: oikos (οἶκος) , which means “family, household, estate”; and nomos (νόμος), which means custom, law.
Now what is the difference between the two sub branches? Let’s have a look, shall we?
Microeconomics vs. Macroeconomics
Microeconomics
It is the study of decisions and choices made by people and businesses which involves the distribution of resources and the pricing of goods and services.
This branch is mainly focused on supply and demand and other elements that determine and measure the price levels in the economy.
Microeconomics have its following main principles or theories:
- Demand, Supply and Equilibrium – This theory focuses more on prices. If suppliers offer the same price demanded by consumers, it is called equilibrium.
- Production Theory – It is a theory which focuses on production.
- Costs of Production – This theory states that the price of goods or services is measured by the cost of the resources used during production.
- Labor Economics– This is mainly focused on workers and employers, and studies the pattern of wages, employment and income.
Macroeconomics
Macroeconomics, on the other hand, is the study of behavior of a country or nation and how its policies and laws affect the economy as a whole.
This branch also analyzes how an increase or decrease in net exports affects a nation’s capital account, or how GDP or Gross Domestic Product would be affected by the unemployment rate.
It also focuses on aggregates or the sum of consumption expenditure, investment expenditure, government expenditure, and net exports and correlations in economy.