Various forms of Economic Analysis

Various forms of Economic Analysis

1. Micro V/s Macro Analysis:-

In micro economic analysis we focus on individual units like a consumer, a producer, a firm, an industry, a single price or a single commodity. We analyse the behaviour of one market variable at a time – it is step by step analyse. Such an analysis helps us to understand behaviour of a single thing, “other things remaining the same.”

In macro economic analysis we study the system as a whole, not the individuals but the total. We focus on the form and functioning of the economy as an aggregate system. Accordingly our variables are national income, national consumption, expenditure, total investment expenditure, total money supply, general price level, overall employment and output levels.

For understanding economic problems like unemployment, we find micro economics very relevant.

Microeconomics theory includes theory of demand, theory of production, Theory of price determination, Theory of profit & capital budgeting .

Macroeconomic theories include theory of national income, theory of economic growth, international trade and monetary mechanism, study of state policies and their repercussion on the private business activities.

2. Positive V/s normative Economic Analysis:-

Economic analysis is the basis of an economic policy. Most of the business polices of an economic unit, like a firm are based on micro economic principles.

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