Relationship between micro economic and macroeconomics for dummies

relationship between micro economic and macroeconomics for dummies

Among the many branches of economics two of the best known areas are the study These relationships are the key focus of microeconomics and how various. Discover the difference between micro and macro economics, as well as Read on to learn the basics of microeconomic and macroeconomic. This is examples Macroeconomics vs Microeconomics attempts to analyze the differences between the two most important branches of Economics viz. Training · SilhouetteFX - Comprehensive Training · DaVinci Resolve Edit - Beginners .. detail about the Macroeconomics vs Microeconomics so just go through the link.

Could you differentiate between micro economics and macro economics? Microeconomics is the study of particular markets, and segments of the economy.

It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms. Macro economics is the study of the whole economy. Micro economics is concerned with: Supply and demand in individual markets Individual consumer behaviour.

relationship between micro economic and macroeconomics for dummies

Consumer choice theory Individual labour markets — e. Reasons for inflation and unemployment. Economic growth Reasons for differences in living standards and economic growth between countries.

Government borrowing Moving from Micro to Macro If we look at a simple supply and demand diagram for motor cars. Microeconomics is concerned with issues such as the impact of an increase in demand for cars. This micro economic analysis shows that the increased demand leads to higher price and higher quantity. Macro economic analysis This looks at all goods and services produced in the economy. The macro diagram is looking at Real GDP which is the total amount of output produced in the economy instead of quantity.

Macroeconomics vs. Microeconomics -

Instead of the price of a good, we are looking at the overall price level PL for the economy. Instead of just looking at individual demand for cars, we are looking at aggregate demand AD — total demand in the economy.

relationship between micro economic and macroeconomics for dummies

Macro diagrams are based on the same principles as micro diagrams; we just look at Real GDP rather than quantity and Inflation rather than Price Level PL The main differences between micro and macro economics Small segment of economy vs whole aggregate economy.

Microeconomics works on the principle that markets soon create equilibrium. In macro economics, the economy may be in a state of disequilibrium boom or recession for a longer period.

Difference between microeconomics and macroeconomics | Economics Help

There is little debate about the basic principles of micro-economics. Macro economics is more contentious. There are different schools of macro economics offering different explanations e. Keynesian, Monetarist, Austrian, Real Business cycle e.

Difference between microeconomics and macroeconomics

Examples of microeconomic issues Microeconomics seeks to solve problems on a small level. An example of a microeconomic issue could be the effects of raising wages within a business. If a large business raises its wages by 10 percent across the board, what is the effect of this policy on the pricing of its products going to be? Since the cost of producing products has increased, the price of these products for consumers is likely to follow suit.

Likewise, what will happen if a company raises wages for its most productive employees but fires its least productive workers? These are the type of questions microeconomics aims to solve. Microeconomics is also useful for studying the effects of your own decisions. One of the most common principles in microeconomics is opportunity cost. Opportunity cost is the value of making one decision over another.

A decision that involves economy cost is the choice of one meal instead of another: Choices involving opportunity cost could relate to your career. By choosing one job over another, you may gain opportunities but lose others.

In addition to factors like supply and demand, opportunity cost is one of the principles of microeconomics.

Macroeconomics vs. Microeconomics

Learn more about opportunity cost, including several examples of the opportunity cost of career choices and buying decisions, in our blog post on the opportunity cost formula. Learn more about intelligent decision making in our Cognitive Biases: Learn to Master Decision Making course.

Examples of macroeconomic issues While microeconomics focuses on the effects a certain decision has on individuals and businesses, macroeconomics looks at the bigger picture.

relationship between micro economic and macroeconomics for dummies

In macroeconomics, a common issue is the effects of certain policies on the national or regional economy. For example, while a microeconomist might study the effects of low interest rates on individual borrowers, a macroeconomist would observe the effects that low interest rates have on the national housing market or the unemployment rate.

Another common focus of macroeconomics is the way taxes affect the economics of a nation.

relationship between micro economic and macroeconomics for dummies

A macroeconomist would look at the effects of a decrease in income taxes using measures like GDP and national income, rather than individual factors. Do you want to learn more about macroeconomics?

Microeconomics vs Macroeconomics

Discover how interest rates and trade policy affects the national economy by enrolling in our 21st century economics course, How The Economy Really Works.