Approaches to economics

Microeconomics
Micro comes from Greek word mikros,
meaning small. It study of behavior
of individual households, firms and
governments for choices they make,
Interaction in specific markets. It
focuses on individual parts of any
economy, rather than the whole.

 Micro economics is the study of

particular firms, particular
households, individual prices, wages,
income, individual industries,
particular commodities. (K. E.
Boulding)

Importance of
microeconomics

Product pricing
Factor pricing
Economic welfare
Optimum production
Allocation of resources

Macroeconomics
Macro comes from Greek word,
makros meaning large. It study of
the economy as a whole and a
focuses on big picture and ignores
fine details.

 Macro economics deals not with

individual quantities but with
aggregate of these quantities, not
with individual income but with
national income, not with individual
prices but with price level, not with
individual output but with national
output.

Importance of macro
economics

Income and employment

General price level
Economic growth
Economic policies
Economics problems

Differences between micro & macro

Economics
S.N.

Micro
economics

Macro
economics

Difference in
the degree of
aggregation

It studies the
individual units
of the economy
like a firm, a
particular
commodity.

It deals with
aggregate like
national income
and aggregate
savings. It
studies the
problem of the
economy as a
whole.

Differences in
objectives

It is to study of
principles,
problems and
policies
concerning the
optimum
allocation of

It studies the
problems,
policies and
principles
relating full
employment of
resources and

Differences in
subject
matter

It deals with
the
determination
of price,
consumers
equilibrium,
distribution
and welfare
etc.

Method of study Micro

economics laws
establish
relationship
between the
causes and
effects of
economics
phenomena and
it is formulated

It is full
employment,
national
income,
general price
level, trade
cycle,
economic
growth etc.
Macro
economics
elements are
categorized into
aggregate units
like aggregate
demand,
aggregate
supply, total
consumption,

Different
assumption

It analysis
how
production
and factors of
production
are allocated
among
different
uses.

It analysis
how full
employment
can be
achieved.

Differences of
the forces of
equilibrium

It studies the
equilibrium
between the
forces of
individual
demand and
supply or
market demand
and supply.

It deals with
equilibrium
between the
forces demand
and supply of
whole economy.