Microeconomics and Macroeconomics both are the branches of economics, studying the behavior, actions and decisions of individual economic agents. Such as individuals, families or companies, and their relationships and interaction in the markets. In this sense, it differs from macroeconomics, which focuses on large – scale economic systems, such as a country or region.
Difference between Microeconomics and Macroeconomics
In order to know the difference between microeconomics and macroeconomics, ponder on the brief discussion given below respectively.
What is Microeconomics?
The microeconomics focuses its analysis on the subject of goods, prices, markets and economic agents and studies, analyzes. Also, explains how and why each individual takes economic decisions to meet their own needs and interests. In this sense, it bases its study on different theories: consumer, demand, producer, general equilibrium and financial asset markets.
Examines and explains the factors involved in consumer decisions are what, why and how much they buy.
The Theory of Demand
The quantity and quality of products, goods and services available on the market. Moreover, vary their prices according to the demand of individual economic agents, taken together or separately.
The Theory of Producer
How it works and what decisions the production company makes to increase its profits in the market. By implying that decisions of internal order, as the number of workers to hire, their schedules, workplace and production standards. The extent to which all of the above would vary with a change in the prices of the product on the market or in the materials used for its manufacture.
The General Equilibrium Theory
Responsible for studying, analyzing and explaining the interaction between all theories of microeconomic dynamics.
The Theory of Active Financial Markets
Different types of markets that may exist in relation to the number of supply and demand, whether monopoly, oligopoly or perfect competition.
Some of its key objectives, the microeconomics focuses on understanding the behavior of businesses, households and individuals. Although, how this influences the market mechanisms that establish relative prices of products, goods and services. Thus, their findings are fundamental in the study of economic theory. Since, they serve as a basis for other areas, such as macroeconomics, to develop their theories. Hence, as a whole, to explain and answer the various facts and phenomena which constitute the dynamics of the economy.
What is Macroeconomics?
A branch of economics that studies the behavior, structure and capacity of large aggregates at national or regional level. Such as economic growth, employment and unemployment rate, interest rate, inflation, among others. The word comes from the Greek macro MAKROS meaning big.
Macroeconomics studies aggregate indicators such as Gross Development Progress, unemployment rates, price indices and seeks to understand. So, that explain the economy as a whole and predicts economic crises.
In the same way, macroeconomics seeks to showcase models that explains the relationship between the different variants of the economy. As they are; National income, production & consumption, unemployment & inflation, savings & investment, international trade and international finance.
Microeconomics vs Macroeconomics
Macroeconomics is responsible for the economic study of global phenomena of a country as economic growth, inflation, unemployment rate. On the other hand, microeconomics studies the behavior of individual economic agents such as individuals, companies and families.
Variables of the Macro-economy
In this sense, macroeconomic models base their study on the following aspects:
- Economic growth: When we speak of an economic increase. It is because there is a favorable trade balance, i.e., there is an improvement of some indicators. Such as, the production of goods and services, savings, investment, increased trade of calories per capita, etc. Therefore, it is the increase in income for a country or a region over a given period.
- Gross National Product: It is an amount or macroeconomic magnitude to express the monetary value of the production of goods and services in a region or country for a certain time, then refers to the production of goods and internal services performed in a particular country then These be marketed internally or externally.
- Inflation: strictly is the increase in prices of goods and services on the market for a period. When prices of goods and services increases each currency unit reaches to buy less goods and services, therefore, inflation reflects the decline in the purchasing power of the currency. If we talk about prices and inflation, we must take into account the costs for the production of these goods and services, since it is there that reflects the increase in the prices of goods and services or can also analyze the surplus value in those goods And services.
- Unemployment: is the situation where a worker is unemployed and in the same way does not receive any salary. It can also be understood as the number of people unemployed or unemployed of the population within a country or territory which is reflected through a rate.
- International Economics: deals with global monetary aspects, trade policy can have some territory or country with the rest of the world that is directly related to international trade, i.e., with purchases and sales of products and services with other countries or with the outside world.
Economic theory proposed by John Maynard Keynes published in 1936 in his book “The General Theory of Employment, Interest and Money” product of the great depression that faced Great Britain and the United States in 1929. Keynes in his theory proposes the use of Monetary and fiscal policies to regulate the level of aggregate demand. Keynes proposes in his theory the increase of the public expense to generate jobs to the point of reaching a balance.
Macroeconomics Paul Samuelson
Samuelson rewrote a part of Economic Theory and was instrumental in the development of the neoclassical-Keynesian synthesis since incorporating principles of both. Paul Samuelson applied thermodynamic mathematical methods to the economy. Although, pointed out 3 basic questions that every economic system should answer. What goods and services and how much are going to be produced, How are they going to be produced and for whom.
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