The differences between macroeconomics and microeconomics Essay

The differences between macroeconomics and microeconomics - Essay Example For example, the objective of study microeconomic theory is to understand the factors related to the optimal allocation of resources whereas, the objective of macroeconomics is to study the factors related to employment and development of scare resources in the economy. Although microeconomics objective is to focus on individual units in the economy and macroeconomics objective to focus on entire economy, both of these fields are contributing to the study of economy and individual behaviours in the economy. The difference between microeconomic theory and macroeconomic theory is that microeconomics focuses on the economic behaviours of individuals including business firms, consumers and resources owners whereas, macroeconomics focuses on economy as a whole and deals with aggregate levels of output, economy, national income and prices (Salvatore, 2006, pp.8). According to Professor G. Thimmaya (cited in Jain & Khanna, 2010) the core difference between the two fields is that price is th e major determinant of problems in microeconomics whereas, income is the major determinant of problems in macroeconomics. In other words, the decisions taken in microeconomics are primarily based on price such as factors of production whereas, the decisions made in macroeconomics are based on income such as total consumption and total investments. Wessels (2006, pp.101) argues that in macroeconomics, the economy is studied as a whole whereas in microeconomics, the economic actions of people including individual firms and the individual households are studied. Wessels explains the difference between the two branches of economics. He argues that if in microeconomics the function of... This essay presents a modern theoretic analysis of the differences and similarities between microeconomics and macroeconomics. Various differences between macroeconomics and microeconomics are identified in the essay however; the primary difference is related to aggregation and objective of the two fields. Both these fields are strong interrelated and concepts and theories of microeconomics are necessary to study concepts in macroeconomics. Economics is the examination of mankind in the normal business of life; it analyses the actions of individuals and society which are closely associated with the achievement and utilisation of needs of well-being. The two branches of economics are microeconomics and macroeconomics. These two fields differ in their scope and objective. The core difference between the two fields is that price is the major determinant of problems in microeconomics whereas, income is the major determinant of problems in macroeconomics. Both subjects have different objectives. The objective of study microeconomic theory is to understand the factors related to the optimal allocation of resources whereas, the objective of macroeconomics is to study the factors related to employment and development of scare resources in the economy. Microeconomics and macroeconomics are substantially related with each other. Major chunk of modern macroeconomics theory involves the applications of microeconomics because the aggregate outcomes in macroeconomics are usually rooted from the decision making theories of consumers and firms