Difference Between Microeconomics and Macroeconomics

Difference Between Microeconomics and Macroeconomics

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Jaya
Jaya Sharma
Assistant Manager - Content
Updated on May 13, 2024 18:54 IST

Microeconomics and macroeconomics are related but have different approaches in studying the economy. While microeconomics considers the actions of individuals and businesses, macroeconomics considers actions of governments and countries that influence broader economies. Microeconomics is impactful on individual level whereas Macroeconomics focuses on the bigger impacts on economy. While the two are very different, both impact each other.

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In this article, we will not only focus on the difference between Microeconomics and Macroeconomics, but also, we will discuss these two in detail. We will discuss their resources and applications to understand these two branches of Economocs.

Table of Contents

What Are The Differences Between Microeconomics and Macroeconomics?

In the previous sections, we have understood micro and macroeconomics in detail. Now, we will learn about the basic difference between macro and microeconomics. 

BASIS  MICROECONOMICS MACROECONOMICS
Definition Microeconomics studies the behaviour of individual consumers and firms. Macroeconomics studies the behaviour of the entire economy based on aggregate demand and factors.
Deals in Individual economic variables Aggregate economic variables
Applications Applied to operational and internal issues of the business. Applicable to environment and external issues of the business. 
Tools Demand and Supply Aggregate Demand and Aggregate Supply
Assumption Every macro-economic variable is constant. Every micro-economic variable is constant.
Scope Product pricing, Demand, Supply, production, Factor pricing, Consumption, Economic welfare, etc. Employment, General price level, National income, labor economics, distribution, money etc.
Significance Product price determination through prices of factors of production in the economy. Maintaining stability in the general price level and resolving major problems of the economy such as inflation, deflation, reflation, poverty and unemployment.
Limitations Unrealistic assumptions, such as a 100% employment rate. ‘Fallacy of Composition’ is unable to prove what is true for aggregate might not be true for individuals as well.

After learning the difference between microeconomics and macroeconomics, we must understand what the subject of Economics is. Economics is a social science that studies the allocation of scarce resources for production, consumption and distribution. It is the study of economies and the behaviour of economic agents. The principle of economics states that “human beings have unlimited wants in a world of limited means”. 

Explore: Difference Between Economy and Economics

That is why this subject deals with efficiency in production and exchange. It also involves the use of models and assumptions to understand the policy that will maximize efficiency. Economics is broadly categorized into macroeconomics and microeconomics. Let us now understand these two branches of Economics.

What is Microeconomics?

Microeconomics focuses on the behaviour of individuals and firms in decision-making related to the allocation of scarce resources. This branch of economics focuses on the study of individual markets, industries, and sectors. The aim of this branch is to study individual labour markets, the theory of firms, and consumer behaviour. Key factors of microeconomics include production theory, labour economics, production cost and demand, supply and equilibrium. Microeconomics involves the following:

  • Conditions under which free markets lead to the desirable allocation 
  • Effects of economic policies on the microeconomic level
  • Supply and demand in the individual markets
  • Individual consumer behaviour and labour markets 
  • Externalities that arise from production and consumption

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Applications of Microeconomics

One of the applications of Microeconomics is positive microeconomics. It describes the economic behaviour when certain conditions change. Suppose, the car prices are increased, then according to positive microeconomics, consumers will buy less than before. 

Through positive microeconomics, you can understand why higher minimum wage forces employers to hire fewer workers. One can use these applications normatively to advise what should be done to attain the most valuable consumption. This branch of economics helps analyse why and how different goods are valued differently.

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Components of Microeconomics

The following components compose Microeconomics:

  • Consumer behaviour
  • Market demand and supply
  • Individual preference
  • Market-specific labour markets

Career Opportunities in Microeconomics

If you plan to specialize in Microeconomics, the biggest employers will be either the government or large organisations. Let us understand the career opportunities as a microeconomist. 

1. Devising policies: Microeconomists devise policies related to corporate regulation, international trade and employment. They are also responsible for putting them into action. You can work on policies that are practically useful.

2. Corporate Advisor: If you have expertise in this field, companies can hire you to assess their supply and demand. Companies like Microsoft hire them to assess the impact of IT on the global economy and to understand its scope. 

How to Learn Microeconomics?

There are many resources that can help you to learn Microeconomics. Let us discuss these in detail:

Books

Books are the most traditional methods of learning anything. Following are the books on Microeconomics

  1. Prices and Quantities: Fundamentals of Microeconomics: The book starts with the most basic principles that involve just one variable. The book reverses the conventional order of treatment and starts from simple mathematics to more complex required to understand microeconomics. The book covers real-life examples to understand the interplay between model and reality.
  2. Math Practice for Principles of Microeconomics: The book helps learners with its collection of maths-intensive practice problems. The book is in the workbook format. It presents equations and problems in different ways. The book consists of problem sets on compound interest, net present value and international trade.
  3. Microeconomics by Stephen Slavin: This is a book on comprehensive Microeconomics with a step by step approach to learning. The book consists of a workbook that helps in learning economics through practice sets. 

Courses on Microeconomics

Those who want to do well in Microeconomics. They can opt for one of the following online courses 

1. Microeconomics: The Power of Markets

This course introduces the concept of microeconomics theory of markets: why we have them, what we accomplish and how they work. It provides explanations through examples. The course will cover the concept of scarcity, supply and demand, specialisation and trade, etc. 

2. Microeconomics: Theory & Applications

This is a postgraduate course that teaches economic theory related to consumers and firms. The course also teaches how economic agents interact with the market. It provides the foundation for applied studies in public policy, business and economics. There are lectures on quantitative techniques to solve real-life business questions. 

3. Principles of Microeconomics: Competitive Markets

Through this course, you will learn about various concepts such as elasticity of demand, the elasticity of calculation, mapping supply, explicit and implicit cost, etc. You will learn the difference between firms that operate as monopolies and others. Through this course, you will learn about global economic behaviour. 

4. Microeconomic Principles: Decision-making under Scarcity

The course introduces you to concepts such as the decision-making behaviour of consumers. You will learn about decision-making when choices are constrained by scarcity. The concepts of equilibrium and efficiency will also be introduced in this course. 

5. Microeconomics & Business

The course introduces you to concepts that govern the operation of the microeconomy. It emphasises understanding microeconomic theory, policy and issues related to business decision-making. Learners will comprehend the working of supply and demand models from a graphical and mathematical perspective. 

Since this blog is about micro and macro economics, let us now learn about macroeconomics.

What is Macroeconomics?

Macroeconomics studies the performance of economies. It is the study of inflation, changes in economic output, balance of payments and interest and foreign exchange rates. It is the study of the behaviour of the national and regional economy as a whole. It focuses on events such as total goods and services produced, unemployment, national income and factors that determine the price. 

Macroeconomics is concerned with the aggregate outcomes of decisions made by firms and consumers. It utilises measures such as unemployment rates, consumer price index and gross domestic product to study the major setbacks of micro-level decisions.

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Applications of Macroeconomics

Macroeconomics helps in solving problems by reviewing aggregate factors. Even if the solution to the problem might not be possible, macroeconomists can provide hypotheses to create economic theories that may be a part of the solution. Through macroeconomics, experts can determine the policies that support the free market. 

They can also determine the portion of free markets that might not need regulations. Important factors like fiscal policy, national income and unemployment help in studying the country’s economy. 

Components of Macroeconomics

The following components compose Macroeconomics:

Career Opportunities After Macroeconomics

Following are the career opportunities after completing a degree in macroeconomics:

  1. Research assistant: If you have a degree in macroeconomics, then you can plan a career as a research assistant. In this profile, you will have to conduct research on aggregate factors to understand their impacts.
  2. Economists: These professionals assess macroeconomic development. They also implement the analytical tools for macrofinancial risk detection. Policy-relevant research on macroeconomics topics is also a part of this job role. 

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How To Learn Macroeconomics?

Following are various resources to learn Macroeconomics:

Books

  1. A Concise Guide to Macroeconomics, Second Edition: What Managers, Executives, and Students Need to Know: The book explains important macro concepts in a simple way. It covers core ideas of money, expectations, and output. Through this book, you will learn the reason behind economic growth, the movement of the exchange rate, and why countries trade. 
  2. Macroeconomics Study Guide: The book is written by N. Gregory Mankiw. He is the research associate of the  National Bureau of Economic Research. It is a study guide that offers ways for students to learn the key concepts of macroeconomics. 
  3. Advanced Macroeconomics: This is a popular book on macroeconomics that is authored by David Romer. The book provides the groundwork for those students that are doing research in monetary economics and macroeconomics.
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Online Courses on Macroeconomics

If you plan to learn Macroeconomics, you can do so through online courses. These courses are based on the industry guidelines based on the latest developments and research.

1. Country Level Economics: Policies, Institutions, and Macroeconomic Performance

This course analyses how the market for aggregate goods and services interact with the money market to shape the macroeconomic equilibrium. It assesses the dynamic effects of the macroeconomic policies and understands the role of institutions, policies, globalisation and expectations in the macroeconomic outcomes. 

2. Macroeconomic Data Analysis of Commodity Markets

The course will help in understanding the description of Macroeconomic indicators. Learners will be able to distinguish the various sectors of the economy to understand the impact of Macroeconomic indicators on commodity markets and prices. You will also understand the impact of MEIs on commodity fundamentals and the scope of programmed training through MEIs. 

3. AP® Macroeconomics

Through this online course, you will learn about the basic macroeconomic concepts, measures of economic performance, aggregate demand and supply, economic growth, etc. The course is segregated into modules that are taught by industry veterans. 

4. Macroeconomic Financial Accounts

The course is suitable for undergraduates who are learning monetary and financial economics, data mining and international macroeconomics. You will get an overview of financial connections among international sectors in the market economies. You will have to work on manipulations of data obtained from institutional websites with spreadsheets. 

5. Country Level Economics: Macroeconomic Variables and Markets

The course discusses the impact of macroeconomic variables on individuals. The course will start with the introduction of these variables. It also focuses on the analyses of money markets and foreign currency to provide fundamental models of interest rate and exchange rate interest. Through the course, you will be able to analyse macroeconomic issues using key tools.

Similarities Between Micro and Macroeconomics

While these two branches of Economics have foundational differences, the two are different in the following manner:

  • These two enhance the evaluation of economic activities to implement strategies that will help in the performance improvement of its processes.
    They evaluate aggregate production and consumption to determine the profitability of economic activities.
  • Both have the purpose of examining financial situations.
  • The concepts in both branches are complementary since microeconomic principles are used to give a context for large-scale financial investigations.

FAQs

State some macroeconomic factors.

Economic output, inflation, and unemployment are important macroeconomic factors.

Which are the most important macroeconomic objectives?

The following are the five most important macroeconomic objectives: 1. Full employment 2. Price stability 3. Fair income distribution 4. Balance of payments equilibrium 5. High and sustainable economic growth

Does microeconomics involve the use of math?

Yes, it does involve the use of math. There may not be a requirement for advanced mathematical skills but it does require basic knowledge of the subject.

How to distinguish between microeconomics and macroeconomics?

Microeconomics focuses on issues such as output, price of goods, and individual income. On the other hand, macroeconomics deals with issues on a higher level, such as national household income and employment rate.

What is the interrelation between macroeconomics and microeconomics?

Microeconomics and macroeconomics are interrelated in terms of the strategies that they use for improvement of the economy of different branches.

About the Author
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Jaya Sharma
Assistant Manager - Content

Jaya is a writer with an experience of over 5 years in content creation and marketing. Her writing style is versatile since she likes to write as per the requirement of the domain. She has worked on Technology, Fina... Read Full Bio