Key Differences between Micro and Macro Economics
The points given below explains the difference between micro and macro economics in detail:
Microeconomics studies the particular market segment of the economy, whereas Macroeconomics studies the whole economy, that covers several market segments.
Micro economics stresses on individual economic units. As against this, the focus of macro economics is on aggregate economic variables.
While microeconomics is applied to operational or internal issues, environmental and external issues are the concern of macro economics.
Microeconomics deals with an individual product, firm, household, industry, wages, prices, etc., while Macroeconomics deals with aggregates like national income, national output, price level, etc.
Microeconomics covers issues like how the price of a particular commodity will affect its quantity demanded and quantity supplied and vice versa while Macroeconomics covers major issues of an economy like unemployment, monetary/ fiscal policies, poverty, international trade, etc.
Microeconomics determine the price of a particular commodity along with the prices of complementary and the substitute goods, whereas the Macroeconomics is helpful in maintaining the general price level.
While analysing any economy, micro economics takes a bottom-up approach, whereas the macroeconomics takes a top-down approach into consideration.
Micro Economics
Pros:
It helps in the determination of prices of a particular product and also the prices of various factors of production, i.e. land, labour, capital, organisation and entrepreneur.
It is based on a free enterprise economy, which means the enterprise is independent to take decisions.
Cons:
The assumption of full employment is completely unrealistic.
It only analyses a small part of an economy while a bigger part is left untouched.
Macro Economics
Pros:
It is helpful in determining the balance of payments along with the causes of deficit and surplus of it.
It makes the decision regarding economic and fiscal policies and solves the issues of public finance.
Cons:
Its analysis says that the aggregates are homogeneous, but it is not so because sometimes they are heterogeneous.
It covers only the aggregate variables which avoid the welfare of the individual.
Similarities
As microeconomics focuses on the allocation of limited resources among the individuals, the macro economics examines that how the distribution of limited resources is to be done among many people, so that it will make the best possible use of the scarce resources. As micro economics studies about the individual units, at the same time, macro economics studies about the aggregate variables. In this way, we can say that they are interdependent.
Conclusion
Micro and Macro Economics are not contradictory in nature, in fact, they are complementary. As every coin has two aspects- micro and macroeconomics are also the two aspects of the same coin, where one’s demerit is others merit and in this way they cover the whole economy. The only important thing which makes them different is the area of application
https://keydifferences.com/difference-between-microeconomics-and-macroeconomics.html
