Microeconomics studies individuals and business decisions, while macroeconomics analyzes the decisions made by countries and governments. Macroeconomics involves the study of aggregated indicators such as GDP, unemployment rates, and price indices for the purpose of understanding how the whole economy functions, as well as the relationships between such factors as national income, output, consumption, u… Definition of macroeconomics, this branch of economics lays focuses on the performance metrics and behavioral patterns of aggregate variables. That ground can be divided into two parts: Microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses; Macroeconomics looks at the economy as a whole. Macroeconomics studies an overall economy or market system, its behavior, the factors that drive it, and how to improve its performance. Macro is the word derived from the greek word ''makro'' which means "large". it assesses not a single unit but the combination of all … _____ is the study of economy-wide phenomena. Having said that, microeconomics does not try to answer or explain what forces should take place in a market. Micro Economics talks about the actions of an individual unit, i.e. basically the environment that has a direct impact on your business Micro and Macro Economics – Meaning of Microeconomics :-The term ‘micro’ has been derived from the Greek word ‘mikros’ which means “small”. On the whole, these two prefixes are hyphenated less frequently than other prefixes, but just to be sure, see our post on prefixes and hyphenation. What Factors Influence Competition in Microeconomics? These include white papers, government data, original reporting, and interviews with industry experts. Macro economics is the study of the whole economy. Macroeconomics, on the other hand, is the study of a national economy as a whole.Microeconomics focuses on issues that affect individuals and companies. What combination of goods and services will best fit their needs and wants, given the budget they have to spend? Microeconomics is the branch of economics that analyzes market behavior of individuals and firms in order to understand their decision-making processes. Microeconomics and macroeconomics are not separate subjects but are, rather, complementary perspectives on the overall subject of the econom… Because microeconomics focuses on the behavior of small units of the economy, it tends to limit itself to specific and specialized areas of study. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms. "I never ask if the market is going to go up or down because I don't know. Microeconomics and macroeconomics are both vast areas of study in their own rights. Macroeconomics has a much broader reach than microeconomics. Classic economic theory assumes that economies always return to a state of equilibrium. Economics is divided into two categories: microeconomics and macroeconomics. In other words, all economics was what we today would call microeconomics. If you continue browsing the site, you agree to the use of cookies on this website. What Is the Utility Function and How Is it Calculated? Prominent areas of research in the field of macroeconomics concern the implications of fiscal policy, locating the reasons for inflation or unemployment, the implications of government borrowing and economic growth on a nationwide scale. Understanding Elasticity vs. Inelasticity of Demand, Factors Determining the Demand Elasticity of a Good. It takes a bottom-up approach to analyzing the economy. Microeconomics is the study of economics at an individual, group or company level. Individual investors may be better off focusing on microeconomics rather than macroeconomics. Microeconomics focuses on supply and demand, and other forces that determine price levels, making it a bottom-up approach. Investopedia requires writers to use primary sources to support their work. Outside a few meaningful and measurable impacts, macroeconomics doesn't offer much for specific investments. Investors who buy interest-rate sensitive securities should keep a close eye on monetary and fiscal policy. Macroeconomics focuses on aggregates and econometric correlations, which is why governments and their agencies rely on macroeconomics to formulate economic and fiscal policy. 2. One of them is called Microeconomics and the other is called Macroeconomics.These two terms microeconomics and macroeconomics were first coined and used by Ranger Frisco in 1933. The offers that appear in this table are from partnerships from which Investopedia receives compensation. 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