MICRO VS MACRO ECONOMICS

What is 'Microeconomics'

Microeconomics is primarily concerned with the factors that affect individual economic choices, the effect of changes in these factors on the individual decision makers, how their choices are coordinated by markets, and how prices and demand are determined in individual markets. The main subjects covered under microeconomics include theory of demand, theory of the firm, and demand for labor and other factors of production.

Read more: http://www.businessdictionary.com/definition/microeconomics.htm

Microeconomics is a branch of economics that studies the reactions or behaviour of individual action, specifically about how those decisions affect the utilization and distribution of scarce resources. Microeconomics shows how and why different goods have different values, how individuals make more efficient or more productive decisions, and how individuals best coordinate and cooperate with one another.
It Shows how human make rational choices to basket of goods.
 It is primarily concerned with factors that affects individuals economic choice,the effect of changes in those factors, how their choices are affected by market forces and how prices and demand are determined in individual market.

Microeconomics is primarily concerned with the factors that affect individual economic choices, the effect of changes in these factors on the individual decision makers, how their choices are coordinated by markets, and how prices and demand are determined in individual markets. The main subjects covered under microeconomics include theory of demand, theory of the firm, and demand for labor and other factors of production.

Read more: http://www.businessdictionary.com/definition/microeconomics.htm

 Microeconomics is the study of economic tendencies, or what is likely to happen when individuals make certain choices or when the factors of production change. Individual actors are often broken down into microeconomics sub niche, such as buyers, sellers and business owners. These actors interact with the supply and demand for resources, using money and interest rates as a pricing mechanism for coordination.

THE BIG PICTURE OF MICROECONOMICS

Microeconomics (from the Greek prefix mikro meaning small) is a subset of economics that studies the behavior of economic agents (Individuals and firms specifically) in making rational decisions regarding the allocation of scarce resources and the relationship that subsist between these economics agents.

Let’s look at it from this example; in a given market that produces varieties of goods and offers varying services, the market schedule shows high demand for Milo, crackers biscuits, Rolex wristwatch and Dangote salt. Several producers will have to shift and allocate their resources towards producing more of the high demand for the goods because if more of these product are being sold, more revenue will be generated leading to a higher profit. Also if the producers are unable to meet up with the demand of these varying goods, the prices will have to increase as a result of the high demand chasing fewer goods. The increase in the price goods as a result of scarcity will result in a decrease in demand. This eventually leads the consumers to finding available substitute like Bournvita, Cabin biscuit, G – Shock wristwatch and Honeywell salt due to high prices of the previous product. Hence the consumer preferences change. Converse is the same when demand for Milo, Crackers biscuits etc are low. Producers will have to reduce their resources towards the production of these goods because they will lead to low revenue and wastage. And also the price of the goods will have to fall in order to make more consumers demand for more of the goods.

From the above illustration, one aim and goal of microeconomics is to examine and analyze the market mechanisms concerning the establishment of relative price of goods and services, allocation of scarce resources, consumer behavior, production process and choice.

Now we can deduce that micro economics is that branch of economics that studies and analyses the reaction of individuals and firms towards making critical decisions regarding the allocation of its available resources and the underlying effects that follows these reactions (price allocation, resource allocation(consumer sovereignty, consumer behavior, choice etc).  

What is 'Macroeconomics'

Macroeconomics is a branch of economics that studies how the aggregate (whole) economy behaves. In macroeconomics, a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. It focuses on trends in the economy and how the economy moves as a whole.

Macroeconomics differs from microeconomics, which focuses on smaller factors that affect choices made by individuals and companies. Factors studied in both microeconomics and macroeconomics typically have an influence on one another. For example, the unemployment level in the economy as a whole has an effect on the supply of workers from which a company can hire. Macroeconomics, in its most basic sense, is the branch of economics that deals with the structure, performance, behavior and decision-making of the whole, or aggregate, economy, instead of focusing on individual markets.

POSTED BY: Monday Desmond