Micro & Macro

Economics

Sandeep G. Pawar
XMBA -10 Batch
Institute of Technology & Management
What is Economics ?
 ECONOMICS

MICRO-ECONOMICS MACRO-ECONOMICS
 MICRO-ECONOMICS
Meaning :
 Micro has been derived from GREEK word
“MIKROS” which mean small .

 It is a study of the individual units of economic

system .

 In other words a small part of economy & not

the whole economy .
 MICRO-ECONOMICS
Definition :
Prof.Boulding,

 “micro economics seeks to explain the

working of individuals, firms, households,
individual prices, wages, particular
industries”.
 MICRO-ECONOMICS
Features :
 Studies individual unit.
 Analyses allocation of resources.
 Product price determination..
 Partial equilibrium analysis.
 Focus on market behaviour.
 Economic welfare.
 Uses slicing method.
 Construction of model.
 MICRO-ECONOMICS
Importance / Uses:
 Helps in allocation of resources.
 Functioning of economic agent.
 Formulation of economic policies.
 Economic efficiency.
 Decision making.
 Working of economy.
 MICRO-ECONOMICS
Limitations:
 The area of study covered by it is limited.
 It can not be immediately applied to the study
of macro economic problems.
 Perfect mobility of resources.
 Free flow of information.
 Full employment & Laissez-faire
 MACRO-ECONOMICS
Meaning :
 Macro is been derived from the Greek word
“MAKROS” which means LARGE.

 Macro economic is the study of large part of

the economy i.e., The whole economy.

 The study of economic behaviour of the

economy as a whole & not the individual
economic units of the economy.
 MACRO-ECONOMICS
Definition :
Prof.Boulding,

“Marco economics deals not only with individual

but with the aggregates of these quantities ,
not with the individual incomes , but with
national income , not with individual prices ,
but with prices level , not with individual
outputs but with the national output ” .
 MACRO-ECONOMICS
Features :
 Study of aggregates.
 Lumping method.
 General equilibrium analysis.
 Useful for government policies.
 Income theory.
 Employment theory.
 Overall view of economy.
 MACRO-ECONOMICS
Importance / Uses:
 Growing importance of macroeconomic issues.
 Persistence of macroeconomic problems.
 Growing complexity of economic systems.
 Need for government intervention with the
market systems.
 Use of macroeconomics in business
management.
 MACRO-ECONOMICS
Limitations:

 It ignores structural changes.

 Aggregates are not reality but a picture or

approximation of reality.

 Intellectual attractions.
 CONCLUSION
 It is true that macro economic is more realistic
and more useful than micro economic . but
this is not that micro economic should be
given up . in fact both cannot adequately
explain working of economic system .
 Both the approaches are inter-related inter-
dependent & complementary to each other .
 Both are necessary for a perfect study of
economics.