Micro- vs. Macroeconomics

Micro- vs. Macroeconomics

Both micro- and macroeconomics are field of economics which deals about the economic relations and behaviors.

Microeconomics investigate the economic behaviors, and that individual people and companies make in regard to the allocation of resources. It focuses on supply and demand and other forces that determine the price levels of goods and services.

Microeconomics is concerned with the efficiency of individual markets – i.e. how to make the most efficient, economic use of given resources. The most important component of it is the price. The price level determines the supply and demand. If low, then the demand is high what in turn induce businesses to mobilise resources, adjust production and so eradicate any shortages and surpluses. If level of prices is high, then the demand decreases, what in turn slow down the economic activity. The market is in equilibrium, when the demand equals supply.

Macroeconomics is the study of the entire industries and economies, not just on specific companies, and individuals' behaviors. All the millions of independent decisions made by consumers and companies in whole country may add up to a general level of national demand and supply.

Macroeconomics deals with the circular flow of income and expenditures between all market actors: households, companies, government and financial institutions. The economy is in equilibrium when income equals expenditures. The imbalance may cause unemployment and inflation.

So in summary,

Microeconomics investigate how resources are used and goods and services are produced and consumed by an individual or company in a single market.Its key role is to analyze the relation between supply, demand and price. Macroeconomics is the analysis of levels of aggregate demand and supply on a national scale. It investigates the inflation, unemployment and economic growth as well as behavior of all market actors which influence these variables.

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