Explain the meaning of micro and macroeconomics.

MICROECONOMICS VS MACROECONOMICS:

It is customer to study economics into two branches- Microeconomics and macroeconomics.

Microeconomics is concerned with the study of small component of the national economy or individual economic agents such as a consumer or a producer firm or a company.

Microeconomics is that branch of economic analysis which studies individual unit, may be consumer or a firm. It studies what a consumer wishes to consume and at what level a consumer gets maximum satisfaction? What price a firm should charge? At what level of output a firm gets maximum profit? What price should be paid to an individual factor of production?

Macroeconomics concerned with these questions in aggregate. Macroeconomics looks at the total amount of goods and services that all consumers in an economy wish to buy at a given price level. The total output of all goods and services that all consumers in an economy at a given point of time. The changes in the general price level, rate of inflation, money supply and fluctuations in total output, employment and incomes in a country are the subject matter of macroeconomics.

A good analogy to describe the relationship between micro and macroeconomics is that of a single tree and group of trees comprising forest. One could easily understand that forest is made up of trees but any individual tree does not make a forest. Similarly it is also obvious that the remedy prescribed to solve the problem of an entire forest of diseased trees would be quite different from the remedy prescribed if any one or two of those trees were diseased.

The connection between macroeconomics and microeconomics has long been a point of confusion and struggle among economists. There are economists who believe that micro economics or price theory can also account for macroeconomic problems like unemployment. On the other hand Keynesian macroeconomics is also criticised for its lack of a firm micro foundation.

In fact, both these branches are complementary and without the study of the one the other cannot complete its knowledge of the economics. Both are complimentary rather than competitive.