What Is The Real Difference Between Macroeconomics and Microeconomics

Difference Between Macroeconomics and Microeconomics are being discussed in this article.The study of the market system, which is the subject of economics, is divided into two main branches or theories; they are macroeconomics and microeconomics.

The prefix macro means large, indicating that macroeconomics is concerned with the study of the market system on a large scale. Macroeconomics considers the aggregate performance of all markets in the market system and is concerned with the choices made by the large sub-sectors of the economy—the household sector, which includes all consumers; the business sector, which includes all firms; and the government sector, which includes all government agencies.

With regard to the macroeconomics of a country, the variables most known and applied in analysis are:

  • GDP – Analysis of Gross Domestic Product;
  • Unemployment rate;
  • Taxes on products and services;
  • Interest rate on installments purchases

The prefix micro means small, indicating that microeconomics is concerned with the study of the market system on a small scale. Microeconomics looks at the individual markets that make up the market system and is concerned with the choices made by small economic units such as individual consumers, individual firms, or individual government agencies.

It  analyzes laws such as supply and demand, between consumers and suppliers, the price level, or the elasticity of each product. That is, how to reach an agreement between the needs of consumers and companies that offer the goods and services , as well as all the “psychological” variables that can affect different needs of each person.

Differences between macroeconomics and microeconomics

From the previous definitions we can highlight several differences that help us to distinguish them:

  • The macro looks for a prospective general and micro an individual perspective.
  • The first one, studies global economic factors , as one country, and the second specific, as a consumer.
  • The variables used are very different, for example in macroeconomics the GDP observes the total production of a country and in microeconomics the quantity produced by a single company.
  • There are situations that affect macroeconomics and not microeconomics, and vice versa. For example, a very cheap new car model will affect microeconomic variables, but not macroeconomic variables.
  • Although they are very different, they are not totally independent and we need both to understand the economy.

Microeconomics and macroeconomics are also completely different in how supply and demand are seen and considered. The focus on microeconomics is on supply and demand for a single product or at most the products offered by a company, while macroeconomics addresses aggregate supply and demand for a whole country or economy around the world.

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