Microeconomics & Macroeconomics

November 11, 2021

Microeconomics and Macroeconomics are the branches of all economic systems. Microeconomics focuses on the behavior of individual economic units. For example, microeconomics can use information from a company’s previous financial reports to improve productivity and reduce production costs so as to enhance the company’s competitiveness.

Macroeconomics, on the other hand, is the study of the economy as a whole; this includes interest rates, inflation rates, and Gross Domestic Product (GDP) figures. For example, macroeconomics can be used to predict the economic growth of the country over a certain time and the effect it will have on the fuel sector.

In this article, we’ll try to look at the main differences between these two subfields of economics, and how each one of them affects a nation.

Differences between micro and macroeconomics

Below are the differences between these two major branches of economics:

The approach systems

Microeconomics embraces the bottom-up approach while macroeconomics takes the top-bottom approach. Microeconomics is keen on the decisions made by the people running the business as affected by the demand and supply of the product in the market. Macroeconomics is concerned with the gross domestic product (GDP), inflation rates, and unemployment rates.

Scope

Microeconomics deals with demand, supply, pricing, economic welfare among others while macroeconomics deals with issues such as national income, employment, distribution, inflation, and others.

Business application

Microeconomics applies to the internal issues that affect the business while macroeconomics deals with the environment and external issues that affect the business.

Impact of microeconomics on a nation

Microeconomics has the following effect on the nation:

Assists the governments in coming up with economic policies. These policies include imposing taxation on goods and services provided by the business, public expenditure policy among others.
Allocation of resources to the society. The government will be in a position to allocate resources to people who require them.

Impact of macroeconomics on a nation

The following discusses the effects of macroeconomics on a nation:

Macroeconomics help in dealing with objectives of economic policy and helps improve the economy of the country. Since macroeconomics deals with the larger scope including other countries, it helps ensure the country’s economy remains at the competing edge.
In cases of pandemics and catastrophes, macroeconomics is responsible for ensuring the nation’s economy remains afloat.

Both micro and macroeconomics are useful in moving the economy of the country. Microeconomics mainly deals with the decisions made in businesses which directly linked with demand and supply of resources. Macroeconomics deals with the larger scope which helps in ensuring the economy of a country is not affected by inflation and other factors.