Micro V/s Macro Economics

Micro V/s Macro Economics

Micro is derived from the Greek word “micros” which means small. Thus micro economics is the theory of small. It is the microscopic study of the economy. The term ‘macro’ is derived from the Greek word “macros” which means large. Macro economics also called “Income Theory” is concerned with the analysis of the economy as a whole and its large aggregates or averages such as total national income and output, total employment, aggregate demand and supply and the general price level.

Importance of Macro Economics:

1. Formulation & Execution of Economic Policies:- Economic polices for the removal of the poverty, the unemployment and the price instability are based upon aggregate requirements.
2. Functioning of the Economy:- Macroeconomics gives us an idea of how a complex economic system functions
3. Study the Economic Development
4. Study of welfare
5. Theory of Inflation & Deflation
6. International Comparisons.

Interdependence of Micro & macro Economics:-

Neither of the two is complete without the other. Demand of the product for a firm or industry depends upon the total employment, income and demand of the entire country for this product. The wages of the firm is related to and depends upon wages to other firm in the industry. Therefore every price, wage and income depends in some way or the other, upon the prices of all

other products, wages of all workers and income of all other individuals in the country respectively. Prosperity and well being of individual economic units can be ensured only if the performance of the whole economy is excellent.

Difference between Micro macro Economics:-

In spite of very close relationship between two braches of economics, they differ from each other fundamentally.

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