The essay talks about the differences between microeconomics and macroeconomics, as fields of economics. The interrelationship between the two fields are also considered. Microeconomics can be recognized as price theory, whereas macroeconomics can be called as theory of income and employment…
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For example, the objective of study microeconomic theory is to understand the factors related to the optimal allocation of resources whereas, the objective of macroeconomics is to study the factors related to employment and development of scare resources in the economy. Although microeconomics objective is to focus on individual units in the economy and macroeconomics objective to focus on entire economy, both of these fields are contributing to the study of economy and individual behaviours in the economy. The difference between microeconomic theory and macroeconomic theory is that microeconomics focuses on the economic behaviours of individuals including business firms, consumers and resources owners whereas, macroeconomics focuses on economy as a whole and deals with aggregate levels of output, economy, national income and prices (Salvatore, 2006, pp.8). According to Professor G. Thimmaya (cited in Jain & Khanna, 2010) the core difference between the two fields is that price is the major determinant of problems in microeconomics whereas, income is the major determinant of problems in macroeconomics. In other words, the decisions taken in microeconomics are primarily based on price such as factors of production whereas, the decisions made in macroeconomics are based on income such as total consumption and total investments. Wessels (2006, pp.101) argues that in macroeconomics, the economy is studied as a whole whereas in microeconomics, the economic actions of people including individual firms and the individual households are studied. Wessels explains the difference between the two branches of economics. He argues that if in microeconomics the function of...
This essay presents a modern theoretic analysis of the differences and similarities between microeconomics and macroeconomics. Various differences between macroeconomics and microeconomics are identified in the essay however; the primary difference is related to aggregation and objective of the two fields. Both these fields are strong interrelated and concepts and theories of microeconomics are necessary to study concepts in macroeconomics.
Economics is the examination of mankind in the normal business of life; it analyses the actions of individuals and society which are closely associated with the achievement and utilisation of needs of well-being. The two branches of economics are microeconomics and macroeconomics. These two fields differ in their scope and objective.
The core difference between the two fields is that price is the major determinant of problems in microeconomics whereas, income is the major determinant of problems in macroeconomics.
Both subjects have different objectives. The objective of study microeconomic theory is to understand the factors related to the optimal allocation of resources whereas, the objective of macroeconomics is to study the factors related to employment and development of scare resources in the economy.
Microeconomics and macroeconomics are substantially related with each other. Major chunk of modern macroeconomics theory involves the applications of microeconomics because the aggregate outcomes in macroeconomics are usually rooted from the decision making theories of consumers and firms
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(The Differences Between Macroeconomics and Microeconomics Essay)
“The Differences Between Macroeconomics and Microeconomics Essay”, n.d. https://studentshare.org/macro-microeconomics/1409967-the-differences-between-macroeconomics-and-microeconomics.
The author states that in every economy three activities never stop: (i) production of goods and services, (ii) generation of income (in terms of wages, rent and profit), and (iii) expenditure (in terms of consumption expenditure and investment expenditure). Production of goods and services causes generation of income. Income causes expenditure.
The field of economics is divided into two different areas: Micro-economics and Macro-economics. Microeconomics is concerned with the fundamentals such as the supply and demand theories and it determines how individuals choose different commodities to produce and the process by which they price it.
However, this value is in many cases distorted by inflation and deflation and it becomes important to adjust the effect of this distortion. For nominal GDP calculation, prices that prevailed when the output was produced are used. Hence, the use of prevailing dollar value means that nominal GDP is not adjusted for changing price levels.
For instance, if the price of pizzas rises, demand will fall as few people will but the commodity. Question two Constant returns to scale refers to the phenomenon in which a proportionate in output is brought about by the same proportionate increase in resources.
Macroeconomics It deals with the analysis of the entire economy including the issues that have the capability of affecting the economy. The issues related in macroeconomics are unemployment, economic growth, inflation as well as monetary and fiscal policies.
With the help of the paradox of thrift, Keynesian economics has been able to illustrate the differences between macroeconomics and microeconomics. It shows how microeconomic considerations only will seriously jeopardize the macroeconomic factors and the economy as a whole.
Microeconomics is the study of individual household’s behavior and decision making of firms on the distribution of limited resources. It can be simplified by saying that microeconomic is the study of markets. (Fogiel )
On the other hand