Five Differences Between Macroeconomics and Microeconomics

Written by jennifer vanbaren
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Five Differences Between Macroeconomics and Microeconomics
People study economics using two interrelated categories: microeconomics and macroeconomics. (Jupiterimages/Comstock/Getty Images)

Economics, as a whole, is the study that focuses on production, distribution and consumption of all goods and services within an economy. Microeconomics and macroeconomics are two categories within this subject that each focus on different aspects of the economy.

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Approach

These two categories of economics each take a different approach when studying the effects and patterns of the economy. Microeconomics takes a bottoms-up approach. With this approach, aspects of the economy from the bottom up, the consumer, are studied first. This information is analysed by working up towards the whole economy. Macroeconomics takes a top-down approach, starting with the top of the economy: the government. It works its way down to the consumer, trying to relate effects and patterns of the economy, in order to develop theories.

Decisions

Microeconomics is a type of study that focuses on individuals and business decisions; whereas macroeconomics studies the economy as a whole by focusing on country and government decisions. Macroeconomics views the big picture of the economy; while microeconomics looks at smaller segments and tries to determine theories to explain them.

Goods and Services

The study of microeconomics uses theories to explain why consumers purchase and allocate resources for certain goods and services. This study focuses on supply and demand and the effects of prices. Economists studying macroeconomics tend to focus on the industries as a whole and the entire economy. This type of economics doesn't look at supply and demand, but instead focuses on larger issues that control consumer spending such as unemployment, national income and rate of growth.

Issues Studied

Microeconomics is the study of individual choices, how these choices are decided, what motivates consumers and the effects they have on the economy. Under this type, economists study the theory of supply and demand and the factors of production. Microeconomics calculates and studies gross domestic product (GDP) and the national debt.

Example

For example, a micro economist may study the types of cars consumers are purchasing. He will try to determine the motivating factors, which might include gas prices and unemployment rates. If gas prices are high, consumers might be avoiding buying SUVs. In unemployment rates are low, car sales might be up. The macro economist will study the car industry as a whole. He will do an analysis to determine why production is up or down. He will study inflation rates and average income rates to determine the affects these things have on the production of vehicles.

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