The distinction between microeconomics and macroeconomics
Modern economic theory is broadly sub-divided into microeconomics and macroeconomics. This is because microeconomic analysis and macroeconomic analysis are the two distinct approaches adopted by modern economists in order to analyze and understand the various economic issues and problems of present-day society. The main differences between microeconomics and macroeconomics are as follows:
1. Difference in nature:
The nature of microeconomics is quite distinct from that of macroeconomics. Microeconomics studies the individual units of the economy like a consumer, a household, a firm, etc. on the contrary, macroeconomics deals with aggregates like national income, total consumption, total expenditure, etc. it studies the behaviour of the economy as a whole.
2. Difference in objective:
The objective of microeconomics on the demand side is to maximize utility whereas on the supply side is to maximize profits at the minimum cost. But, the main objectives of macroeconomics are full employment, price stability, economic growth and a favourable balance of payment.
3. Difference in basis:
The basis of microeconomics is a price mechanism, which operates with the help of individual demand and supply. These forces help to determine the equilibrium price in the market. But the basis of macroeconomics is the general price level, which is determined by aggregate demand and aggregate supply.
4. Difference in assumption:
Microeconomics is based on the assumption of full employment of resources. Based on the assumption of full employment, microeconomics analyses how resources are allocated. But macroeconomics rejects the assumption of full employment and analyses how resources can be fully employed.
5. Difference in the method of study:
Microeconomics is based on the partial equilibrium analysis which helps to explain the equilibrium of an individual, a firm, an industry, etc. but macroeconomics is based on the general equilibrium analysis which an extensive study of a number of economic variables and their interdependence for understanding the working of the economic system as a whole.
6. Area of study:
Theory of value and theory of economic welfare are the major areas covered in microeconomics. The theory of value includes product pricing and factor pricing. But the income and employment theory and monetary theory are the core topics of macroeconomics. Similarly, public finance, growth theories and international trade are also included in the field of macroeconomics.
7. Moral and immoral subject:
Microeconomics deals with individuals; and individuals are mortal because after passing some lifetime in the world, an individual dies. But macroeconomics deals with society as a whole and society never ends. Therefore, the subject-matter of macroeconomics is immortal.
Difference Between Microeconomics and Macroeconomics
The Difference between microeconomics and macroeconomics can be summarized as shown in the following table:
| Basis of Differences | Microeconomics | Macroeconomics |
|---|---|---|
| Nature | Micro economics is a study of individual units of an economy. | Macro economics is a study of economy as a whole. |
| Area of Study | Micro economics studies individual economic units such as a consumer, a household, a firm, an industry, a commodity, etc. | Macro economics is a study of national aggregate such as national income, national output, general price level, level of employment, etc. |
| Problems | Micro economics deals with determination of price of a commodity, a factor of production, satisfaction of a consumer, etc. | macro economics deals with the problems of unemployment, trade cycles, international trade, economic growth, etc. |
| Partial/General Equilibrium | Micro economics is based on partial equilibrium analysis, other things remaining the same. | Macro economics is based on general equilibrium. |
| Moral/immoral | The subject-matter of micro economics is mortal. | The subject-matter of macro economics is immortal. |
| Suitability | Micro economics is suitable to study the problems of individual economic units. | Macro economics is suitable for the problems of economy as a whole. |
| Also called | Micro economic is also called price theory or value theory. | Macro economic is also called theory of income and employment or Keynesian Theory. |
