To keep the differences between these policies straight, remember that the term monetary relates to money, and the term fiscal relates to government revenue or taxes. These are the main tools the government has to work with. Americans tend to expect that government can fix whatever economic problems we encounter, but to what extent is that expectation realistic?
These are just some of the issues that will be explored later in this course. The differences between microeconomics and macroeconomics as well as their respective and focal points are explained again in the following video:. Skip to main content. Search for:. Microeconomics and Macroeconomics Learning Objectives Distinguish between macroeconomics and microeconomics.
Try It. WAtch It The differences between microeconomics and macroeconomics as well as their respective and focal points are explained again in the following video:. Glossary fiscal policy: economic policies that involve government spending and taxes macroeconomics: the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance microeconomics: the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and businesses monetary policy: policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing.
Microeconomics vs. Supply and Demand Basics. Microeconomics Concepts. Economy Economics. Macroeconomics: An Overview Economics is divided into two categories: microeconomics and macroeconomics. Key Takeaways Microeconomics studies individuals and business decisions, while macroeconomics analyzes the decisions made by countries and governments.
Microeconomics focuses on supply and demand, and other forces that determine price levels, making it a bottom-up approach. Macroeconomics takes a top-down approach and looks at the economy as a whole, trying to determine its course and nature. Investors can use microeconomics in their investment decisions, while macroeconomics is an analytical tool mainly used to craft economic and fiscal policy.
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Partner Links. In particular, the microeconomics focuses on supply and demand patterns, pricing and production in individual markets. Macroeconomics focuses on the study of the economy as a whole, not just specific companies but an entire industry.
Therefore, the study examines how factors such as GDP, inflation, unemployment and other factors affect the economy as a whole. Any change in the unemployment rate, for example, may have a significant impact on the country's GDP.
These two branches of economics are of vital importance and play an important role in shaping the fate of countries and the destiny of nations at the local and global levels. In this article, we will try to review the differences and similarities between microeconomics and macroeconomics.
Microeconomics is a branch of economics that deals with the economic behavior of each unit of economy, such as individuals, companies or industrial sectors, as well as the factors affecting individual choices, the impact of economic changes in decision-making in markets.
Microeconomics is defined as social science, which examines the consequences of individuals' actions, especially as they relate to the nature of the impact on decisions to use and distribute resources. It also deals with the behavior of the consumer to know how to distribute his expenditure among the different commodities so as to achieve maximum satisfaction within the limits of his income.
In addition to studying how resources and prices of goods and services are allocated and how they determine the forces of supply and demand. If we want to take an example of microeconomics, we can say that microeconomics looks at how a particular company can increase its production while keeping prices low overall. The microeconomics is of great importance in the work environment, that can be summarized by the following points:.
Microeconomics consists of a set of key elements:. Supply: A quantity of a service or commodity that the merchant agrees to sell at a specified price. Demand: The willingness of individuals or enterprises to pay a sum of money in exchange for services or goods within a certain period of time. Elasticity: Elasticity is the means of determining the nature of changes in the demand for consumer goods; because of the change in their prices, when the goods are flexible it indicates that demand is affected by the price change, and if they are not flexible, the demand is not affected by the price changes.
Opportunity Cost: The financial cost that is the best value alternative to goods or services that are an option for individuals and companies. Macroeconomics is concerned with studying a variety of economic phenomena such as inflation, price levels, growth rate, national income, GDP, changes in labor market conditions and the effects of exports and imports.
It focuses on trends in the economy and how the economy moves as a whole. Read time: 5 mins. Most people understand how physics is classified as a science, however, there might be some confusion when including economics in the same category. In fact, economics is a social science, as it shares the same qualitative and quantitative elements common to all social sciences.
Economics can be broken into two sections: microeconomics and macroeconomics. Microeconomics can be defined as the study of decision-making behaviour of individuals, companies, and households with regards to the allocation of their resources.
Macroeconomics is the holistic study of the structure, performance, behaviour, and decision-making processes of an economy, at a national level. This is done to interpret and know the state of the economy, so that policies can be formulated at a higher level, and macro research can be carried out for academic purposes. Macroeconomics analyses entire industries and economies, rather than singular companies or individuals.
Microeconomics and macroeconomics both explore the same elements, but from different points of view. It is clear that macroeconomics does not exist in isolation, but rather is entwined with microeconomics, and works in tandem in order to be efficient.
Similarly, a national policy that involves microeconomics could affect how households and enterprises interact with their economy. For example, if the government raises the tax on a certain product macroeconomics , an individual shop owner will have to increase the price, which will impact on the consumer and their decision for or against the product at that price microeconomics.
This, in turn, helps their deposit rate to drop, which gives room to lower the interest rate on credit, and to individuals and business. This causes a rise in borrowings and creates a climate of greater investment, which helps businesses invest in new assets, projects, and expansion plans a micro impact. The condition of the microeconomy is one of the many factors that determine macroeconomic policies.
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