Differecne Between Micro And Macro Economics

Presented To:

Mr. Rasheed Presented By: Muhammad Haroon Farman Ali

Muhammad Haroon 2nd M B A Roll No:10607

Definition of Economics: Economics is a science which studies human behaviour as a relation between unlimited desires and limited means (resources) which have alternative uses.

Classification of Economics  

Micro Economics Macro Economics

Economics

Micro

Macro

Micro Economics Definition: Microeconomics is a branch of economics that studies how individuals, households and firms and some states make decisions to allocate limited resources, typically in markets where goods or services are being ...

Micro economics has been divided into four parts

1 production: Meaning of production of wealth. Cost of production & how it is minimize. Analysis of supply. 

2 Exchange: This part covers the market mechanism or exchange of wealth through the forces of demand & supply. Perfect and imperfect competition Behaviour of competitors.

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3 Distribution: This part starts with the theory of distribution of rewards to four factors of production. Wages Rent Interest Profit.

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4 Consumption This part focus on the behaviour of a consumer Maximize the total utility Minimize the expenditure

Importance 

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To make economic policies for efficient production. To understand the working of private enterprise economy. To study the welfare of the economy.

Limitations  

It studies a part of economy not as a whole. Similarly a single firm or an industry is in progress but the whole economy may be in depression.

Farman Ali M B A 2nd Roll No:10609

Macro Economics Definition: 

A study of the economy as a whole, particularly the interaction of its various components.

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The study of the entire economy in terms of the total amount of goods and services produced, total income earned, the level of employment .

Components of Macro Economics     

National Income Inflation Deflation Trade Cycle Aggregate Unemployment

Importance

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It studies overall market structure. Overall production cost is considered. It is helpful to understand the functioning of complete economic system. Economics policies can’t be made just for an individual but made for nation as a whole. Overall tax expects of the country is considered. It is helpful to find the solution of current economic problems e.g. unemployment, inflation and poverty. In real view whole economy is more important than the individual.

Limitations 

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Individual is ignored in macro economics but the individual welfare is main aim of economics. Macro economics don’t show the individual difference. For instance, general price level may be stable but the prices of food grains are unbearable for the poor.

Differentiation 

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Study of any specific individual unit e.g. A Consumer, A Firm, An Industry, Fop's Micro approach should be applied when individual cases are to be examined. Economic policies made for efficient production.

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Study of economy as a whole e.g. National Income, Inflation, Trade Cycle etc. Macro approach should be applied when aggregate problem are involved. Economic policies made for nation as a whole. Macro analysis is helpful to find the solution.

Conclusion The Micro and Macro economics are interdependent. Both approaches help to analyze the working of the economy. Sometimes Micro analysis is need and sometimes Macro analysis is need, but both are important and we can’t neglect any one. Macro approach should be applied when aggregate problems are involved and Macro approaches should be applied when individual cases are to be examined.

Questions??

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Thanks