Difference Between Macroeconomics and Microeconomics with Proper Definition and Brief Explanation in Tabular Form
Macroeconomics is the branch of economics that analyzes the economy in a broad sense and deals with the factors that affect the national, regional or global economy as a whole. Microeconomics analyzes the economy on a smaller scale and deals with specific entities such as companies, households and individuals.
This comparison takes a closer look at what constitutes macroeconomics and microeconomics, their real-life applications, and the options if one pursues it as a career option.
Comparative graph Difference Between Macroeconomics and Microeconomics
Comparative table of macroeconomics versus microeconomics:
| Macroeconomic | Microeconomics | |
|---|---|---|
| Definition | Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. | Microeconomics is the branch of economics that deals with the behavior of individual entities such as the market, companies and households. |
| Foundation | The basis of macroeconomics is microeconomics. | The microeconomics is made up of individual entities. |
| Basic concepts | Production and income, unemployment, inflation and deflation .. | Preference, supply and demand relationships, opportunity cost. |
| Applications | It is used to determine the general health, standard of living and the improvement needs of an economy. | It is used to determine improvement methods for individual business entities. |
| Professional careers | Economist (general), professor, researcher, financial advisor .. | Economist (general), professor, researcher, financial advisor .. |
Contents: Macroeconomics vs Microeconomics
- 1 definition
- 2 Real world application
- 3 basic concepts of macroeconomics
- 3.1 Product and income
- 3.2 Unemployment
- 3.3 Inflation and deflation
- 4 basic microeconomic concepts
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- 4.1 Preference relationships
- 4.2 Supply and demand
- 4.3 Opportunity cost
- 5 races
- 6 education
- 7 opinions on economic change
- 8 references
Definition Difference Between Macroeconomics and Microeconomics
Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole, as opposed to individual markets. This includes national, regional and global economies. Macroeconomics involves the study of aggregate indicators, such as GDP, unemployment rates, and price indices, in order to understand how the entire economy works, as well as the relationships between factors such as national income, production, consumption, unemployment, inflation, savings, investment, international trade and international finance.
Microeconomics, on the other hand, is the branch of economics that focuses primarily on the actions of individual agents, such as businesses and consumers, and how their behavior determines prices and quantities in specific markets. One of the objectives of microeconomics is to analyze the market mechanisms that establish the relative prices between goods and services and the allocation of limited resources among many alternative uses. Significant fields of study in microeconomics include general equilibrium, markets under asymmetric information, choice under uncertainty, and economic applications of game theory.
Real world application Difference Between Macroeconomics and Microeconomics
Macroeconomics is generally used to determine the health of a nation’s economy by comparing a country’s GDP and its total output or expenditures. GDP is the total value of all final goods and services legally produced in an economy in a given period of time. Therefore, a region is considered to be in better health when the relationship between GDP and expenditures is higher, that is, in simple terms, that a nation is contributing more than it offers. Another measure used is GDP per capita, which is a measure of the value of all goods and services divided by the number of participants in an economy. This is used to determine the standard of living and the extent of economic development in a country, where a higher standard of living and greater economic development occur as more people have a higher overall production value. For example, the US and China have similar overall GDP, but the US has much better GDP per capita due to having far fewer economic participants, reflecting the higher standard of living in the US. Macroeconomics is also used to develop strategies for economic improvement at the national and global levels.
Microeconomics is used to determine the best type of options that an entity can make to obtain the maximum benefit, regardless of the type of market or environment in which it is involved. Microeconomics can also be considered a tool for economic health if it is used to measure the income / output ratio. of companies and households. Simply put, gaining more than you lose equals a better individual economy, just like at the macro level. Microeconomics is applied through several specialized subdivisions of study, including industrial organization, labor economics, financial economics, public economics, political economy, health economics, urban economics, law, and economics and economic history.
Macroeconomics basics
Macroeconomics encompasses a variety of concepts and variables related to economics in general, but there are three central themes for macroeconomic research. Macroeconomic theories usually relate the phenomena of production, unemployment and inflation.
Exit and income
National production is the total value of everything that a country produces in a given period of time. Everything that is produced and sold generates income. Therefore, production and income are generally considered equivalent and the two terms are used interchangeably. Production can be measured as total income, or it can be viewed from the production side and measured as the total value of final goods and services or the sum of all value added in the economy. Macroeconomic production is generally measured by Gross Domestic Product (GDP) or one of the other national accounts. Economists interested in long-term increases in economic growth from the study of production. Technological advances, the accumulation of machinery and other capital, and better education and human capital lead to increased economic output over time. However, the output does not always constantly increase. Business cycles can cause short-term drops in production, called recessions. Economists seek macroeconomic policies that prevent economies from going into recession and lead to faster, long-term growth.
Unemployment
Unemployment in an economy is measured by the unemployment rate, the percentage of unemployed workers in the workforce. The workforce only includes workers who are actively seeking work. People who are retired, seeking education, or discouraged from seeking work due to lack of job prospects are excluded from the workforce. Generally, unemployment can be divided into several types related to different causes. Classic unemployment occurs when wages are too high for employers to be willing to hire more workers. Frictional unemployment occurs when there are suitable job openings for a worker, but the time required to search and find the job leads to a period of unemployment. Structural unemployment covers a variety of possible causes of unemployment, including a mismatch between workers’ skills and the skills required for open jobs. While some types of unemployment can occur regardless of the condition of the economy, cyclical unemployment occurs when growth stagnates.
Inflation and deflation
Economists measure changes in prices with price indices. Inflation (general increase in prices throughout the economy) occurs when an economy overheats and grows too fast. Inflation can lead to greater uncertainty and other negative consequences. Similarly, a declining economy can lead to deflation or a rapid decline in prices. Deflation can decrease economic output. Central banks try to stabilize prices to protect economies from the negative consequences of price changes. Raising interest rates or reducing the money supply in an economy will reduce inflation.
Basic microeconomic concepts
Microeconomics also encompasses a variety of concepts and variables related to the individual, the home, or the business. We will focus on the three central themes of microeconomic research: preference relationships, supply and demand, and opportunity cost.
Preference relationships
Preference relationships are simply defined as a set of different choices that an entity can make. Preference refers to the set of assumptions related to the request for some alternatives, depending on the degree of satisfaction, enjoyment or utility they provide; A process that results in an optimal choice. Integrity is taken into consideration, where “integrity” is a situation in which each party can exchange all good, directly or indirectly, with any other party without transaction costs. To further analyze the problem, the transitivity assumption is considered a term for the way preferences are transferred from one entity to another.
Offer and demand
In microeconomics, supply and demand is an economic model for determining prices in a market. It concludes that in a competitive market, the unit price of a particular good will vary until it is established at a point where the quantity demanded by consumers (at current price) equals the quantity supplied by producers (at current price), which results in an economic Balance for price and quantity.
Opportunity cost
The opportunity cost of an activity (or goods) is equal to the following best alternative uses. Opportunity cost is a way of measuring the cost of something. Rather than simply identifying and adding costs for a project, you can also identify the best alternative way to spend the same amount of money. The lost profit from this next best alternative is the opportunity cost of the original choice.
Professional careers
Macroeconomics investigates and analyzes data on national and global economies. They collect information from longitudinal studies, surveys, and historical statistics, and use it to make predictions in the economy or even to offer solutions to problems. The specifics of an economy, such as the manufacture and distribution of raw materials, poverty rates, inflation, or the success of trade are also a main focus for macroeconomists, who are frequently consulted by politicians and civic authorities when making decisions. public policy decisions ..
Micro economists focus on specific industries or businesses. An expert microeconomist conducts extensive research on the financial affairs of a business and offers advice on how to scale or make improvements. They often construct supply and demand relationship charts to determine the budget and resources to be allocated to production. A micro-economist can help business owners and CFOs establish pay scales based on industry trends and the availability of funds.
Education
Macroeconomics and microeconomics are, in the university world, generally relegated to specific higher-level courses that fall under the main subject of Economics. Most of the time, an actual college degree program will be simply economics, although a student majoring in this subject may choose to specialize in the micro or macro areas as electives. All economics majors, regardless of subject area, will be required to take multiple courses in mathematics, particularly calculus, and usually some statistics courses as prerequisites for higher-level economics courses. Business students, as well as some other potential specialties, they will often have to take a basic economics course or two as part of their foundation courses, and some students will simply choose to take Economics 101 for what it offers to their education. A student may also be a minor in economics, a practice often done to provide a good foundation for students seeking careers in law, business, government, journalism, and teaching.
Opinions on the economic change
Macroeconomists tend to be all about economic stimulus and its accompanying, although there is a lack of unity even among macroeconomists on this particular issue. From the point of view of macroeconomists, what is needed to fix the economy of a given country today is to pour money into it. This action is done for the purpose of providing economic growth, and is then analyzed in terms of how much growth occurs, how much unemployment is caused or prevented, and when the government will get its money back, if at all. Most macroeconomists are Keynesians, or economists who support government intervention and direction of the economy, and measure success primarily by the above factors when considering what to do with government money.
Microeconomists, on the other hand, are often not so positive about stimulus action by the government. They believe that macroeconomists tend to ignore the most basic microeconomic question: where are the incentives? Who has an incentive to improve the economy? Microeconomists believe that it is a mistake to consider the country as an entity, because it is not the real country that decides where the stimulus money will be spent. Rather, it is the politicians who rule the country. So instead of seeing what would be best for the country, we have to see what incentives politicians would have to do. Instead of assuming that politicians would choose based on what is best for a country’s economic health.
The problem is such that at the very basic framework level, microeconomists are considering completely different factors than macroeconomists when analyzing the health of our attempts at economic recovery.