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Microeconomics vs Macroeconomics: Introduction
Economics is divided into two branches, namely: microeconomics and macroeconomics.
Microeconomics deals with the economic problems of a single industry or organisation, while macroeconomics deals with the problems of an economy as a whole.
Both of these branches contribute a major part in business analysis and decision-making directly or indirectly. Let us discuss two branches of economics in detail as follows:
Microeconomics: It is a branch of economics that deals with the study of the economic behaviour of individual organisations or consumers in an economy. Moreover, microeconomics focuses on the supply and demand patterns and price and output determination of individual markets.
Microeconomics lays emphasis on decisions related to the selection of resources, the amount of output to be produced, and the price of products of an organisation. hus, it can be said that the focus of microeconomics is always at the individual level.
Importance of Microeconomics
The importance of microeconomics is explained as follows:
- Microeconomics helps in understanding the mechanism of individual markets.
- It suggests ways for making full utilisation of resources.
- It facilitates the formation of economic models that can be further be used to understand the real economic phenomenon.
Macroeconomics: It is a branch of economics that mainly deals with the economic behaviour of various units combined together.
Macroeconomics focuses on the growth of an economy as a whole by undertaking the study of various economic aggregates, such as aggregate supply and demand, changes in employment, gross domestic product (GDP), overall price levels, and inflation.
Importance of Microeconomics
The following points explain the importance of macroeconomics:
Macroeconomics helps in understanding the functioning of an economic system and provides a better view of the world’s economy
- It enables nations to formulate various economic policies.
- It helps economists in finding solutions to economic problems by providing various economic theories.
- It helps in bringing stability in prices by supporting detailed analysis of fluctuations in business activities.
- It helps in identifying the causes of the shortage in the balance of payment and determining remedial measures.
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