Macroeconomics vs. Microeconomics

The similarities and differences of Macroeconomics and Microeconomics

The declination of purchasing power of individuals and heightened inflation were due to the current financial crisis in the world that had resulted in huge losses for many companies. The whole economy of the world slipped, especially the low income groups who accounts for maximum of world’s population. In such inflationary conditions, it is the middle and lower class population who suffers a lot but the upper class had not suffered much as they still have purchasing power. This scenario is administered by the macro and micro economics where central banks had to take huge jumps to control their economies. Trading between the countries being a vital part of countries, the economic policies of various countries lean to rise above the borders alongwith the products and services supplied.

Macroeconomics

Macro economics is that part of economics that refers to the whole economy and the decisions circles around social indicators like GDP, consumer price indices and unemployment. Macroeconomics is wholly governed by the GDP of a country, inflation, savings, unemployment, international policies and import and export policies. Thus, macro-economic refers to the whole nation or larger part and is used by government and corporations to forecast an outlook of the firm or to know the probability of survival of the firm.

Microeconomics

Micro economics is that part of economics which deals only with single unit or a single firm or an individual. The focus of micro economics is more on household and the demand-supply models are governed vastly by existing interest rates, inflationary conditions of the economy and the purchasing power of individual. When the demand for“bin of goods” increases, then its supply decreases and ultimately the price increases whereas, on the other hand if demand decreases then price also decreases finally increasing the supply of finished goods. This is the pattern of adjusting demand and supply of the economy.

Difference between Macro and Micro Economics

Macro takes into consideration all potential factors of an economy alongwith the policies of other economies also. On the contrary, micro economics looks only at individuals and their buying behaviour in an economy. Both use different concepts. Macro economies rely hugely on GDP, unemployment, national income and rate of growth. Micro economics looks at individuals, their buying behaviour, interest rates and other government regulations imposed on them. This is then interpreted into a demand supply chart that shows the possibility for entities.

Conclusion

Apart from being different on studies for both concepts they are interdependent on each other. Macroeconomics governs the micro as well as individuals because individuals are part of the economy. When macro policies changes, then the purchasing power of whole economy and finally the individuals also changes. Both policies act as an agent for corporations to know their feasibility in an economy based on the pricing and finally the purchasing power of the economy.