Branches of Economics

Asst.Prof.Seena Alappatt
Department of Management Studies
 Two Branches
In 1933,Ragnar Frisch classified economics into two branches
 MACRO

MACRO-GREEK WORD-”MAKROS” -LARGE.

It is that part of economic theory which studies the economy

in it’s totality or as a whole.

It studies not individual economic units like a household, a

firm or an industry but the whole economic system.

Macro economics is the study of aggregates.

Aggregate demand, aggregate savings and investment,

aggregate supply ,total employment, general price level,
national income etc.
 Micro
Micro-Greek-MIKROS-Small.

Micro economics is that part of economic theory which deals with behavior of
Individual units of an economy such as household, a firm etc.

It is the analysis of economy’s constituent elements-households,firm and

industries.

Micro economics takes the microscopic view of the economy.

The subject matter of micro economics deals with :

1)Determination of prices of individual products and factors
2)Allocation of resources to their most valuable uses so as to maximize total
output of the economy.(ie,it deals with central problems of “what, how and for
whom to produce”)

It is known as price theory or theory of Firm

 Is Economics A Positive Or Normative Science

• Meaning of Positive science : Positive science mainly

explains ‘what is’.
• It deals with things as they are and explains causes
and efforts without making value judgments whether it
is right or wrong.
• In other words, Positive science only describes things
as they actually are.
• It is concerned with the actual.
• It deals with theoretical aspects. Thus positive science
may be called as pure science.
• Meaning of Normative Science : Normative science
is concerned with “what ought to be or should be”.
• It is concerned with the ideals.
• It explains whether a thing is good or bad.
• It lays down policies and rules to achieve what is
considered to be good.
• It evaluates the things.
• Thus normative science may be called as applied
science. For example, when we analyze the causes
for poverty, Economics becomes a Positive science.
But if we discuss whether poverty is good and what
policies should be followed to remove poverty,
Economics is a Normative science.