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Microeconomics vs Macroeconomics

Source: Google

Microeconomics is the social science that studies the implications of incentives and decisions, specifically about how those affect the utilization and distribution of resources. Microeconomics shows how and why different goods have different values, how individuals and businesses conduct and benefit from efficient production and exchange, and how individuals best coordinate and cooperate with one another. Generally speaking, microeconomics provides a more complete and detailed understanding than macroeconomics.

It will also deals with prices and production in single markets and the interaction between different markets but leaves the study of economy-wide aggregates to macroeconomics. Microeconomists formulate various types of models based on logic and observed human behavior and test the models against real-world observations.

The key factors of microeconomics are as follows:

  • Demand, supply, and equilibrium

  • Production theory

  • Costs of production

  • Labour economics

The study of microeconomics involves several key concepts, including (but not limited to):

  • Incentives and behaviors: How people, as individuals or in firms, react to the situations with which they are confronted.

  • Utility theory: Consumers will choose to purchase and consume a combination of goods that will maximize their happiness or “utility,” subject to the constraint of how much income they have available to spend.

  • Production theory: This is the study of production—or the process of converting inputs into outputs. Producers seek to choose the combination of inputs and methods of combining them that will minimize cost in order to maximize their profits.

  • Price theory: Utility and production theory interact to produce the theory of supply and demand, which determine prices in a competitive market. In a perfectly competitive market, it concludes that the price demanded by consumers is the same supplied by producers. That results in economic equilibrium.

The seven blocks of microeconomics

  1. Consumer rationality: It assumes that consumers will make rational decisions to maximize utility given the scarcity of resources.

  2. Price determination in a competitive market: Price in a perfect market is determined by demand and supply.

  3. Production, cost, and revenues: This block determines how much production is needed to generate the target revenue considering all the costs poured into production processes.

  4. Market structures: These determine the nature and competition in the market.

  5. Labour market answers the question: is the necessary labour force available?

  6. Market failure: When price mechanisms fail to allocate resources, the market fails.

  7. Distribution of wealth: Income inequality may cause more poverty even if the standard of living is improving.


Macroeconomics is a branch of economics that depicts a substantial picture. It scrutinizes itself with the economy at a massive scale, and several issues of an economy are considered. The issues confronted by an economy and the headway that it makes are measured and apprehended as a part and parcel of macroeconomics.

The important concepts covered under macroeconomics are as follows:

  1. Capitalist nation

  2. Investment expenditure

  3. Revenue

Difference Between Microeconomics vs Macroeconomics:

Microeconomics Macroeconomics

Microeconomics is the branch of Economics that is related to the study of individual, household and firm’s behaviour in decision making and allocation of the resources. It comprises markets of goods and services and deals with economic issues.

Macroeconomics is the branch of Economics that deals with the study of the behaviour and performance of the economy in total. The most important factors studied in macroeconomics involve gross domestic product (GDP), unemployment, inflation and growth rate etc.

It studies market sector of economy

It studies economy that covers market segments

It deals with various issues like demand, supply, product pricing and more!

It deals with various issues like national income, distribution, money and more!

It is applied to internal issues

It is applied to environmental and external issues.

It is useful in regulating the prices of product alongside the prices of factors of production within the economy

It firmness in broad price level, and solves the major issues of economy like deflation, rising prices and poverty as whole.

In microeconomics, it is presumed that there is full employment in the community, which is not at all feasible.

In macroeconomics, it sometimes fails to prove accurate because it is feasible that what is true for aggregate (comprehensive) may not be true for individuals as well.

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