Micro Vs Macro
Updated: Mar 7, 2021
Microeconomics and macroeconomics are the two fields that make up economics as a whole. As noted by their names, microeconomics studies individual firms and macroeconomics studies larger economies, but how else do they differ? This article will explore the differences between microeconomics and macroeconomics.
Microeconomics is the study of individual people and firms making economic decisions. I would classify microeconomics as a study of cause and effect since it focuses on the causes of shifts in the market and the effects on the economy.
A crucial component of microeconomics is supply and demand. Supply and demand describes how the amount of products that are available and the demand for those products determine the amount and price the are bought and sold. For more information on supply demand check out one of our past articles.
Microeconomics is important because it helps individual firms make decisions. This section of economics is key to helping firms determine how much of a good they should produce at different levels of amount demanded, and how much they should price a good.
Macroeconomics is the study of the larger economies, usually one of a nation. This includes economic activity of businesses, consumers, the government, and markets. Macroeconomics can be classified as a study of problem and solution since economists use data in a nation's economy find solutions to problems in the economy.
An important factor of macroeconomics is GDP. GDP is basically the value, in money, of all final goods produced in a country. Final goods are complete products, and includes cars and computers. GDP best shows the economic growth in one nation and the living standards of its citizens. We will discuss GDP more in a future article.
Macroeconomics is important because it helps a nation identify problems in its economy, and guides policies to help solve those problems. This field of economics helps governments find the best ways to promote stable economic growth. In fact, macroeconomics was created back during the Great Depression just to do this.
Microeconomics and macroeconomics are very important in their respective ways. Aspects of both studies are incredibly influential on the economy. It is essential to understand each in order to see the full picture of economics.
Before I end this article, I want to give a huge shoutout to my amazing economics teacher for teaching me all this. He has been really helpful in my journey to learn about economics.
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