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intro to microeconomics and macroeconomics
Microeconomics studies household and firm decision-making and how they interact in markets with one another.
Macroeconomics studies the economy as a whole, including inflation, unemployment, and economic growth.
Macroeconomics and microeconomics are closely related because we understand macroeconomic developments by studying microeconomic decisions.
Terms
macroeconomics
The study of the entire economy in terms of the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the general behavior of prices.
microeconomics
That field of economics that deals with the small-scale economic activities such as that of the individual or company.
Examples
Microeconomics involves the study of individual businesses, households, and markets. There are numerous branches of microeconomics and the following are a few examples. Industrial organization examines topics such as the entry and exit of firms, innovation, and the role of trademarks. Labor economics examines wages, employment, and labor market dynamics. Public economics examines the design of government tax and expenditure policies and economic effects of these policies (e.g., social insurance programs).
Production Possibilities Frontie...
Macroeconomics and Microeconomics
The study of economics has two basic scopes: that of individual firms and households, as well as the economy as a whole.
Microeconomics
Microeconomics is the study of individual markets and the behavior of individual households and firms within those markets. Microeconomics is concerned with the actions of individual economic agents rather than how groups of these individuals behave in the aggregate.
For example, a microeconomist would be interested in why individual consumers choose to buy chocolate instead of strawberries and why firms choose to produce cars instead of motorcycles. This economist would not endeavor to study the aggregate effects of this behavior or its effects on the economy as a whole, as a macroeconomist would. The microeconomist is interested in how the price of chocolate is determined in a local market, but is not as concerned with how that price factors into the overall level of prices in the economy. Microeconomics also analyzes market failures, general equilibrium, choice under uncertainty, and the economic applications of game theory. (Figure 1)
Macroeconomics
Macroeconomics is the study of the economy as a whole. It looks at aggregated populations instead of individual actors, and focuses on aggregated indicators such as GDP, unemployment rates, and the overall level of prices (the inflation rate) to measure the economic performance of national economies.
Macroeconomists develop models that explain the relationship between such factors as:
national income,
output,
consumption,
unemployment,
inflation,
savings,
investment,
international trade, and
international finance.
In the example above, the microeconomist studied the behavior of the individual consumer choosing between chocolate and strawberries. The macroeconomist is more interested in measuring the overall level of consumption in all markets, including those for strawberries and chocolate. Understanding the overall level of consumption, how it is affected by other economic variables, and its effect on the economy as a whole are questions for the study of macroeconomics. Macroeconomic models and their forecasts are used by both governments and large corporations to assist in the development and evaluation of economic policy and business strategy.
Macroeconomics studies the economy as a whole, including inflation, unemployment, and economic growth.
Macroeconomics and microeconomics are closely related because we understand macroeconomic developments by studying microeconomic decisions.
Terms
macroeconomics
The study of the entire economy in terms of the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the general behavior of prices.
microeconomics
That field of economics that deals with the small-scale economic activities such as that of the individual or company.
Examples
Microeconomics involves the study of individual businesses, households, and markets. There are numerous branches of microeconomics and the following are a few examples. Industrial organization examines topics such as the entry and exit of firms, innovation, and the role of trademarks. Labor economics examines wages, employment, and labor market dynamics. Public economics examines the design of government tax and expenditure policies and economic effects of these policies (e.g., social insurance programs).
Production Possibilities Frontie...
Macroeconomics and Microeconomics
The study of economics has two basic scopes: that of individual firms and households, as well as the economy as a whole.
Microeconomics
Microeconomics is the study of individual markets and the behavior of individual households and firms within those markets. Microeconomics is concerned with the actions of individual economic agents rather than how groups of these individuals behave in the aggregate.
For example, a microeconomist would be interested in why individual consumers choose to buy chocolate instead of strawberries and why firms choose to produce cars instead of motorcycles. This economist would not endeavor to study the aggregate effects of this behavior or its effects on the economy as a whole, as a macroeconomist would. The microeconomist is interested in how the price of chocolate is determined in a local market, but is not as concerned with how that price factors into the overall level of prices in the economy. Microeconomics also analyzes market failures, general equilibrium, choice under uncertainty, and the economic applications of game theory. (Figure 1)
Macroeconomics
Macroeconomics is the study of the economy as a whole. It looks at aggregated populations instead of individual actors, and focuses on aggregated indicators such as GDP, unemployment rates, and the overall level of prices (the inflation rate) to measure the economic performance of national economies.
Macroeconomists develop models that explain the relationship between such factors as:
national income,
output,
consumption,
unemployment,
inflation,
savings,
investment,
international trade, and
international finance.
In the example above, the microeconomist studied the behavior of the individual consumer choosing between chocolate and strawberries. The macroeconomist is more interested in measuring the overall level of consumption in all markets, including those for strawberries and chocolate. Understanding the overall level of consumption, how it is affected by other economic variables, and its effect on the economy as a whole are questions for the study of macroeconomics. Macroeconomic models and their forecasts are used by both governments and large corporations to assist in the development and evaluation of economic policy and business strategy.