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Microeconomics Vs. Macroeconomics

Understanding the difference between microeconomics and macroeconomics is one of the basics of economic studies.
WealthHow Staff
Last Updated: Sep 14, 2018
In a broad sense, microeconomics and macroeconomics are subcategories of economics. Even though they are different from each other in several aspects, they are also dependent on each other.
Nevertheless, there are more differences than similarities between the two, and these differences are highlighted in the name itself. While microeconomics has the focus on smaller entities (i.e., the consumer and producer), macroeconomics focuses on the larger entity (i.e., the economy).
Microeconomics
In economics, microeconomics is the branch that deals with the functionality and behavior of individual entities, such as business firms and households. The effect of the functioning and behavior of these entities on the supply and demand for goods and services is also taken into consideration in this subcategory of economics.
Typical questions asked in this case include ...
  • How does a consumer take decisions on the consumption of goods and services?
  • How do firms price their goods and services?
It also takes into consideration the decision-making power of these individual units. Microeconomics is important, as it studies the economic factors, like the consumer behavior, and gives a clear picture of the economy.
Macroeconomics
Macroeconomics, on the other hand, is the branch that deals with the functionality and behavior of the entire economy of the nation, or the world. This includes concepts like national income, price level, employment, interest rates, etc.
Typical questions asked in this case include ...
  • What are the causes of inflation?
  • What are the effects of national debt on the economic growth of the nation?
Yet another important aspect that macroeconomics takes into consideration is the influence of government economic policies on all the aggregates mentioned. Though it looks at the economy in a broader perspective, it does help in studying the condition of the economy and also facilitates the analysis of the same.
Microeconomics Versus Macroeconomics
As we said earlier, there are quite a few differences between these two concepts. While microeconomics stresses on the individual firms and consumer, macroeconomics deals with the whole economy as a single unit.
This invariably means that the former takes into consideration the demand and supply of individual goods and services, while the latter takes into consideration the aggregate of demand and supply of all goods and services.
Yet another point of distinction in this comparison is the point of equilibrium. In microeconomics, the equilibrium occurs when the quantity demanded equals the quantity supplied. In macroeconomics, on the other hand, equilibrium occurs when the aggregate demand equals aggregate supply.
To sum it up, microeconomics focuses on the various factors of supply and demand, and the repercussions of these factors on the price of commodities, while macroeconomics focuses on economic growth and changes in the national income.
Though there exist many differences between the two, they are dependent on each other to some extent. Rise in inflation (macroeconomics), for instance, increases the price of raw material, which, in turn, increases the price of the end product (microeconomics). In the end, both are needed to sustain economic growth without sacrificing necessary standard.