Question

Whats the difference between macro and micro economics?

Answer 1

The following points tell the difference between micro and macro economics:

1. Micro economics deals with economic issues related to small economic units that is an individual firm, an individual household or an individual consumer whereas macro economics deals with economic issues at the level of economy as a whole.

2. In micro economics, economic agents focus on maximization of personal gains. In macro economics, economic agents focus on maximization of social welfare.

3. Micro economics is called theory of price as it is concerned with the determination of price in the market. Macro economics is called theory of income and employment as it is concerned with determination of aggregate output and general price level.

4. In micro economics, there is a limited degree of aggregation of economic variables as compared to macro economics.

5. General equilibrium analysis is the method of study in macro economics and partial equilibrium analysis is the method of study in micro economics.

6. Study of micro economics assumes macro economic variables remain constant. Study of macro economics assumes that micro economic variables remain constant.

7. Allocation of resources is the central issue in micro economics whereas in macro economics the central issue is determination of the over all level of output.