Economics is classified into many types but in this blog, we will concentrate only on microeconomics and macroeconomics presently.
The analysis of the behavior of individual decision-making unit within an economic system, from households to business firms is called microeconomics. It focuses on individual participant in the economy. For example, the producer, consumer, worker etc. The following issues (and many more) are discussed in microeconomics:
- How producers act
- Demand Analysis
- Allocation of resources
- Cost and production
- Wages, interest, profit and rent
- General equilibrium
- Welfare Analysis
- How the market prices are determined
- Demand Estimation and forecasting
- How consumers behave.
Before the Great Depression, economist concentrated their efforts on microeconomics. The Great Depression made the economists realize that individual decision-making has a far different effect from the society deciding as a whole Microeconomics focuses on individual entity level for example a consumer, a producer etc.
Macroeconomics is the study of the economy at an aggregate level, i.e. the economy as a whole. After the Great Depression, economists started analyzing the economic activity at a macro level. The overall price level, inflation, exchange rate of currency, etc. are topic discussed in macroeconomic analysis. The following issue (and many more) are discussed in microeconomics:
- Banking and Monetary systems
- National income and developments
- Inflation and deflation
- Economic growth and development
- Monetary policy, fiscal policy and commercial policy
- Demand and supply of money
- Circular flow of money
- Trade cycles, economics cycle and many other topics.
|DEFINITION||The analysis of the behavior of |
individual decision-making unit
within an economic system,
from households to business
firms is called microeconomics.
|Macroeconomics is the study of |
the economy at an aggregate
level, i.e. the economy as a whole.
|FOCUSES ON||It focuses on individual |
participant in the economy.
|It focuses on aggregate level of |
|BUSINESS APPLICATION||Applied to internal or |
|Applied to external and |
|ASSUMPTION||All the macroeconomics |
variables are constant.
|All the Microeconomics variable |
|SCOPE||Cover various issues like, |
consumer behave, cost,
production, wages, profits,
interest, demand, supply, saving,
consumption, welfare, market
|Cover various issues like, |
banking, monetary systems,
national income, employment,
economic growth, demand and
supply of money, policies, etc.
|IMPORTANCE||It provides a useful tool to the |
executive authority of the
country while making sectoral
decisions. It helpful in allocation
of resources, production,
consumption, social welfare, etc.
|It helps us understand drives of |
income, economic growth,
investments, saving, formulating
economic policies and full
employment in an economy.