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