Explain Micro and Macro approaches of the Economics Analysis

Q) Explain Micro and Macro approaches of the Economics Analysis

Micro Economics:

The word “micro” means a millionth part. When we speak of micro-economics or the micro- approach, what we mean is that it is some small or component of the whole economy that we are analyzing.

For example, behavior or that of an individual firm or what happened in any particular industry. In microeconomics what we study is that price of a particular product or of a particular factor of production and not the general price level of the country.

In micro-economics we study the following issues:

1. Individual consumer’s behavior 

2. One product’s price 

3. One individual consumer’s demand and his income 

4. Study of the individual firm’s location, cost, revenue, and profit 

5. Remuneration of individual factor of productions.

Scope of Field of Study:

Price Theory: In Price Theory, two important economic factors- demand and supply are discussed with the help of these two factors. It is analyzed how the price of a commodity is to determined. 

Theory of Consumption Behavior: This theory deals with three main economic problems that how consumer can get maximum satisfaction from their limited spending. In this regard, the theory of Marginal Utility and Indifference Curves Theory are worth mentioning. 

Theory of Behavior of Firms: This theory guides various types of firms how they can grow under different business organization, maintain equilibrium through their output and price decision. 

Theory of Production: This theory deals with three important laws of returns or laws of cost.

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Macro Economics:

Macro-economics is concerned with aggregate and averages of the entire economy. Such as national income, aggregate output, total employment, total consumption, saving and investment, aggregate demand, aggregate supply, genera price level, etc In other words, in micro-economics we study how these aggregates and averages of the economy as a whole are determined and what causes fluctuations in them.

Macro-Economic deals also with how an economy grows. In other words, it analysis the chief determinants of economic development and various stages and processes of economic growth. This part of economics theory has been largely developed in the last three decades. 

Scope of Fields of Studies:
Macro-Economic deals with the problems of unemployment, economic fluctuations, inflation and deflation. It concerns with the effect of investment and total output, total income and aggregate employment. In monetary field, it studies the effect of the total quantity of money on the general price.