Macro Vs Micro Economics.ppt 66y6v

Micro vs macro economics

the term micro is derived from the greek word ‘mikros’ which means small thus micro economics is the theory of small. Micro economics is that branch of economics which studies an economic or decision making unit and considers in detail the behavior of that particular unit

Features of micro economics it deals with the analysis of the behavior and economic actions of small individuals units of the economy such as particular consumers, particular firms or small groups of individuals units, including various industries and markets

Scope of micro economics • • • • • •

Wages theory Incomes, individuals, industries Equilibrium of innumerable units of economy. Individuals households as consumers Individual firms as producers Behavior of individual firms in the fixation of price, output, employment and their reactions to the changes in the demand and supply conditions.

Nature of micro economics 1. 2.

3.

Micro economics may assume full employment problems studied under micro-economics relate to the allocation of scarce resources of the economy between the production of different goods and services. Determination of price of goods and factors of production

importance of micro-economics • Micro economic analysis is extremely useful and helpful in the formulation of economic policies that will promote economic welfare of the masses. • Micro economics solves the three central problems of the economies. Q) what goods and services are produced? Q) how goods and services are produced? Q) For whom to produce produced and distributed. • It promotes economic efficiency • Micro economies has application in various diversified fields of economic and commerce, such as agricultural economies, labor economies, international economics, consumer economics.

Relationship between micro & macro economics • Interdependence of micro and macro economics small variables constitute in the aggregate variables • Even macro-economic analysis require micro-economic analysis to draw better decisions. • Micro-economy can not be added and will become macro or vice-versa, this is incorrect and misleading.

Difference between micro & macro economics • Savings are good for the individuals it helps in accumulating wealth. But the country should invest productively otherwise depressions and unemployment • An individual can buy more of a commodity but many individuals try to buy more the price would shoot up. • Individual may save and invest differently but aggregate total savings are equal to aggregate investment. • Micro-economy assumes full employment economy whereas macroeconomics does not assume full employment.