Micro and Macro Economics: Meaning, Difference and Components
Economics is divided into two categories: Micro Economics and Macro Economics. Microeconomics is related to the study of individual, household, and firm behavior in decision making and allocation of resources. It includes markets of goods and services and deals with economic issues. On the other hand, macroeconomics studies the behavior and performance of the whole economy in total. The most important factors studied in macroeconomics involve gross domestic product (GDP), unemployment, inflation and growth rate, etc.
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When we divide a complete economy into several parts i.e. into several segments or units and study or analyze each segment, it will be known as Microeconomics. So, microeconomics is the segmentwise study of economics. Segment implies the individual units i.e. an individual, firm, household, market, etc.
Microeconomics is the study of decisions made by people and businesses regarding the allocation of resources, and prices at which they trade goods and services. It considers taxes, regulations, and government legislation. Alternatively, we can say it tries to understand human choices, decisions, and the allocation of resources. It analyzes the economy from its bottom. It does not try to answer or explain what forces should take place in a market. Rather, it tries to explain what happens when there are changes in certain conditions.
Components of microeconomics are demand and supply, saving, productivity, market competition, opportunity Cost, labor, price, fluctuation, welfare economy, market analysis, and many more.
Macroeconomics is the study of whole economics at once. Here the whole economy means the economy of a whole nation or world economy. So it represents a big picture of the economy. It analyzes not a single unit but the combination of all i.e. firms, households, nation, industries, market, etc.
Macroeconomics studies the behavior of a country and how its policies impact the economy as a whole. It analyzes entire industries and economies, rather than individuals or specific companies. Whatever policies are formed at the macro level it impacts at the micro-level. For example, if the government issue any policy for the petroleum industry (which is happening at the national level i.e. macro-level), it impacts each company/firm's behavior running under the industry (which is impacted at the individual level i.e. micro-level).
Macroeconomics focuses on the aggregate result of a whole economy. It analyzes economy-wide phenomena such as gross domestic product (GDP) and how it is influenced by changes in unemployment, national income, rates of growth, and price levels. Other components of macroeconomics can be inflation, fiscal policy,...