When we talk about macroeconomics while studying the constituents of output in nations economy we also have to understand the demand of single households and firms, which are micro-economic concepts. Microeconomics and Macroeconomics are both exploring the same things but from different viewpoints. Increased inflation (a macroeconomic effect) would increase the prices of raw materials required by the companies to manufacture products which would in turn also affect the price for the final product charged to the public. Looking at the above mentioned differences between macroeconomics vs microeconomics it appears that these two studies of economics are different but in reality they are inter-related and complement each other since the issues that they address are overlapping. It helps in developing policies appropriate resource distribution at economy level such as inflation, unemployment level etc.ĭo Macroeconomics vs Microeconomics interact with each other? It helps in developing policies appropriate resource distribution at firm level. It deals with the circular flow of income and expenditure between different sectors of the economy. It deals with the flow of various factors of production from a single owner to a single user of those resources. It is also known as the income theory because it explains the changing levels of national income of an economy during a period of time. It is also known as the price theory because it explains the process of economic resources allocation on the foundation of relative prices of several goods and services. It has a wide scope and interprets the economy of a country as a whole. It is narrow in scope and interprets the small constituents of the entire economy. It deals with averages and aggregates of the entire economy such as national income, aggregate output, aggregate savings etc.
It deals with the decision-making of single economic variables such as the demand, price, consumer, etc. It includes understanding how unemployment, price levels, growth rate affects the economy-wide aspects such as the Gross National Product (GNP). On the other hand, Macroeconomics, studies the behavior of not only particular companies or industries but the whole economy. Microeconomics would study how a company could lower its prices to increase its product demand in the market. It primarily focuses on the supply, demand, and other forces that define the price levels of goods and services in the economy. While saying so we also take into consideration the taxes and other regulations that have been created by governments. It deals with a specific industry or a sector, the connections of firms and households in the market. Understanding Macroeconomics vs MicroeconomicsĪs the name suggests, Microeconomics studies the decisions made by individuals and businesses concerning the distribution of resources and prices of goods and services. Learn the juice of this article in just a single minute, Macroeconomics vs Microeconomics Macroeconomics vs Microeconomics Infographics How macreconomic vs microeconomic variables affect equity investors?.Do Macroeconomics vs Microeconomics interact with each other?.
Understanding Macroeconomics vs Microeconomics.Macroeconomics vs Microeconomics Infographics.The article on Macroeconomics vs Microeconomics is structured as below – Private Equity Modeling Certification Training.Hence economics is the study of how the available resources are managed and organized to deal with the needs and wants of society. Considering the entire society as a family it has unlimited wants which are ever-increasing and sources that are available to satisfy them are limited. If we break the word up, ‘Oikos’, means ‘Home’, and Nomos’, means ‘Management’. Economics is derived from the Greek word ‘Oikonomikos’. microeconomics and macroeconomics and their relationship, let’s first understand this interesting term economics. Well before we go on to see the two most important branches of economics viz. This article on Macroeconomics vs Microeconomics attempts to analyze and understand these issues and their effects on investors. Suppose you have 200 dollars with you, the choice of using that money to pay off your bill or spend it on an outing is all an economic decision. The economic condition of the country whether may it be inflation or unemployment directly affects our finances, growth, and many other areas that permit us to be self-sufficient in our lives. Economics influences the prices of the goods and services we buy, as well as the income we earn at our jobs. What is Macroeconomics vs Microeconomics?Įconomics is omnipresent and forms an integral part of our lives.
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