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Microeconomics and Macroeconomics: Meaning, Scope, Difference and Interdependence

Last Updated : 30 Jan, 2024
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What is Microeconomics?

Microeconomics is a branch of economics studying the behaviour of an individual economic unit. Adam Smith is known as the father of economics and microeconomics. Microeconomics help in contemplating the attributes of different decision-makers in an economy like individuals, enterprises, and households. In simple terms, microeconomics help in understanding why and how different goods have different values, how individuals make certain decisions, and how they cooperate with each other. For example, individual output, individual income, etc. The main tools of Microeconomics are Demand and Supply.

What is Macroeconomics?

Macroeconomics is a part of economics that focuses on how a general economy, the market, or different systems that operate on a large scale, behaves. Macroeconomics concentrates on phenomena like inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment. For example, aggregate output, national income, aggregate consumption, etc. The main tools of Macroeconomics are Aggregate Demand and Aggregate Supply.

Difference between Microeconomics and Macroeconomics




Meaning Microeconomics is a branch of economics studying the behaviour of an individual economic unit. Macroeconomics is a part of economics that focuses on how a general economy, the market, or different systems that operate on a large scale, behaves.
Tools Demand and Supply are the two tools of Microeconomics. Aggregate Demand and Aggregate Supply are the two tools of Macroeconomics.
Basic Assumptions The basic assumption of microeconomics is that all the macro variables are constant. The macro variables include income, savings, consumption, etc. The basic assumption of macroeconomics is that all the micro variables are constant. The micro variables include decisions of firms and households, prices of individual products, etc.
Basic Objective The basic aim of microeconomics is determination of the price of a commodity or factors of production. The basic aim of macroeconomics is determination of the income and employment level of the economy.
Degree of Aggregation Microeconomics involves a limited aggregation degree. For example, market demand is derived by the aggregation of individual demands of all the buyers in a particular market. Macroeconomics involves the highest aggregation degree. For example, aggregate demand is derived for the entire economy.
Other Name As microeconomics is primarily concerned with price determination of commodities and factors of production, it is also known as Price Theory. As macroeconomics is primarily concerned with determining income level and employment, it is also known as Income and Employment Theory.
Example Individual Output, Individual Income, etc. National Output, National Income, etc.

Interdependence of Microeconomics and Macroeconomics

Economics is a single subject and its analysis is not possible by splitting it into two watertight compartments. In simple terms, microeconomics and macroeconomics are not independent of each other. Instead, they have so much common ground between them. It means that Microeconomics and Macroeconomics are interdependent.

Microeconomics depends on Macroeconomics

  • By analysing the behaviour of a group of people, the Law of Demand came into existence.
  • The general price level prevailing in the economy has a great influence on the price of a commodity.

Macroeconomics depends on Microeconomics

  • National Income of an economy is the sum total of individual units’ incomes of the country.
  • Aggregate Demand of an economy depends on demand of its individual household.

Micro-Macro Paradoxes

Paradox means a contradictory or seemingly absurd statement, which is often true. Sometimes paradoxes can be seen in Micro and Macro activities. It means that there can be an act which is good for an individual but harmful to the economy as a whole. For example, Savings made by an individual can be beneficial for him and his family, but if the whole economy starts saving then it will result in a contraction of demand, income, employment, and output, because of which the whole economy might suffer.

Microeconomics and Macroeconomics: Which is more Important?

Both microeconomics and macroeconomics have a place of their own and are important; hence, it is not possible to dispense any of the two. The concentration of microeconomics is on the working of the individual components and macroeconomics studies the economy in general. Also, microeconomics is concerned with the aggregate structure and macroeconomics is concerned with the aggregates themselves. Therefore, both microeconomics and macroeconomics are supplementary to each other, and the superiority of one approach over the other cannot be claimed.

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