Microeconomics vs. Macroeconomics

Microeconomics vs. Macroeconomics

  • Submitted By: khennebry
  • Date Submitted: 07/18/2011 8:31 AM
  • Category: Business
  • Words: 310
  • Page: 2
  • Views: 2

Macroeconomics deals with the general economics of a country whereas microeconomics deals with the economics of specific systems or markets. Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy.

Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena, such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account.

Microeconomics is the study of individual small units within an economy such as demand by consumer supplied by individual supplier dynamics of a single market and by individual firms or industries. Macroeconomics is the study of economic problems in the economy as a whole, hence deals with economic aggregates such as unemployment, inflation material output and International exchange.
Macroeconomics covers the behavior of the economy as a whole before considering impact on individual units. An example is inflation or rate of increases in price that decreases purchasing power. The microeconomic factors of price, cost and income influenced by decision to trade my old car for a new one and the macroeconomic factors of inflation and credit crunch worsened by rising oil prices, has affected my decision to purchase a smaller fuel-efficient new car Introduction Microeconomics and macroeconomics are different but interrelated and the distinction between the two determines the nature, extent and...

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