Definition of 'Microeconomics'

Meaning: Microeconomics is the study of individuals, households and firms' behavior in

decision making and allocation of resources. It generally applies to markets of goods and
services and deals with individual and economic issues
Definition: Microeconomic study deals with what choices people make, what factors influence
their choices and how their decisions affect the goods markets by affecting the price, the supply
and demand.

Features of Micro-Economics.
The features of Microeconomics are:
1.It is concerned with the study of individual units in the economy.
2.Micro economic analysis involves product pricing, factor pricing and theory of
welfare.
3.Assumption of "Ceteris Paribus" is always made in every micro economic theory.
It means the theory is applicable only when 'other things remain unchanged'.
4. Micro economics divides the economy into various small units and every unit is
analysed in detail, i.e. uses slicing method.

 Importance of Macroeconomics
 It helps us understand the functioning of a complicated modern economic
system. It describes how the economy as a whole functions and how the level of
national income and employment is determined on the basis of aggregate
demand and aggregate supply.
 It helps to achieve the goal of economic growth, a higher GDP level, and higher
level of employment. It analyses the forces which determine economic growth of
a country and explains how to reach the highest state of economic growth and
sustain it.
 It helps to bring stability in price level and analyses fluctuations in business
activities. It suggests policy measures to control inflation and deflation.
 It explains factors which determine balance of payments. At the same time, it
identifies causes of deficit in balance of payments and suggests remedial
measures.

Importance of micro economics.

Price Determination:

Micro economics helps in explaining how the prices of different commodities are
determined.  It also explains how the prices of various factors of production such as
rent for land, wages for labour, interest for capital and profits for entrepreneur are
determined in the commodity and factor market.

II. Working of a Free Market Economy:

Free market economy is that economy where the economic decisions regarding
production of goods such as ‘What to produce, How much to produce, How to
produce etc.’ are taken by private individuals.

These decisions are based on the preference of the consumer or demand for the
product. Micro economics theory helps in understanding the working of the free
market economy.

III. International Trade & Public Finance:

Micro economics helps to explain many international trade aspects like effects of
tariff, determination of exchange rates, gains from international trade etc. It is also
useful in public finance to analyze both, the incidence as well as effect of a
particular tax.

IV. Utilization of Resources:

Micro economics helps in explaining how the scarce resources can be effectively
and efficiently utilized by the producers in order to achieve maximum output.

Meaning of Macro Economics.

Macroeconomics is a branch of economics that studies how an overall economy

—the market or other systems that operate on a large scale—behaves.
Macroeconomics studies economy-wide phenomena such as inflation, price
levels, rate of economic growth, national income, gross domestic product (GDP),
and changes in unemployment.

Some of the key questions addressed by macroeconomics include: What causes

unemployment? What causes inflation? What creates or stimulates economic
growth? Macroeconomics attempts to measure how well an economy is
performing, to understand what forces drive it, and to project how performance
can improve.

Macroeconomics deals with the performance, structure, and behavior of the

entire economy, in contrast to microeconomics, which is more focused on the
choices made by individual actors in the economy (like people, households,
industries, etc.).

Definition: Macroeconomics is the branch of economics that studies the behavior and

performance of an economy as a whole. It focuses on the aggregate changes in the economy
such as unemployment, growth rate, gross domestic product and inflation.

Scopes of Microeconomics
Commodity pricing
The price of an individual commodity is determined by the market forces of demand
and supply. Microeconomics is concerned with demand analysis i.e. individual
consumer behavior, and supply analysis i.e. individual producer behavior.

Factor pricing theory

Microeconomics helps in determining the factor prices for land, labor, capital, and
entrepreneurship in the form of rent, wage, interest, and profit respectively. Land, labor,
capital, and entrepreneurship are the factors that contribute to the production process.

Theory of economic welfare

Welfare economics in microeconomics is concerned with solving the problems in
improvement and attaining economic efficiency to maximize public welfare. It attempts
to gain efficiency in production, consumption/distribution to attain overall efficiency and
provides answers for ‘What to produce?’, ‘When to produce?’, ‘How to produce?’, and
‘For whom it is to be produced?’
Differences Between Microeconomics And Macroeconomics

Microeconomics Macroeconomics

                                                                             Meaning

Microeconomics is the branch

of Economics that is related to
the study of individual, Macroeconomics is the branch of Economics that deals with
household and firm’s behaviour the study of the behaviour and performance of the economy in
in decision making and total. The most important factors studied in macroeconomics
allocation of the resources. It involve gross domestic product (GDP), unemployment, inflation
comprises markets of goods and growth rate etc.
and services and deals with
economic issues.

                                                                         Area of study

Microeconomics studies the

Macroeconomics studies the whole economy, that covers
particular market segment of
several market segments
the economy

                                                                             Deals with

Microeconomics deals with

various issues like demand,
Macroeconomics deals with various issues like
supply, factor pricing, product
national income, distribution, employment,
pricing, economic welfare, general price level, money, and more.
production, consumption, and
more.

                                                          Business Application

It is applied to internal issues. It is applied to environmental and external issues.

   

                                                                                 Scope

It covers several issues like It covers several issues like distribution, national income,
demand, supply, factor pricing, employment, money, general price level, and more.
product pricing, economic
welfare, production,
consumption, and more.