Question

What are the two basic types of economies?

Answer 1

(a) Microeconomics: It studies the behavior of individual units, sectors in the economy. For example: consumer theory, production theory, price and demand of a particular product. It is all about how individuals make decisions.

(b) Macroeconomics: It studies the behavior of an economy as a whole. It studies the large scale or general economic factors. For example: National output, Inflation, aggregate demand and aggregate supply. It focuses on the aggregate changes in the economy.