In today’s world, the demand for Microeconomics and Macroeconomics is going very high. Every person wants to learn about his country’s economy. For this it is important to know about economics as a subject. Economics plays a vital role in understanding the concepts and difference between microeconomics vs macroeconomics.
ECONOMICS:
Economics means the utilisation of resources in an appropriate manner. It works for the welfare of people. It provides many types of techniques to run the country and small business. It helps the government to frame policies and plan for the future. It also helps the small business to sales maximisation.
TYPES OF ECONOMICS:
- MICROECONOMICS: Microeconomics refers to a small part of economics. Microeconomics considers the micro element of economics like Cost of Production, Cost Theory, Product Theory, Demand Theories, Law of Demand, Supply etc. It mainly concerns about single business or firm.
- MACROECONOMICS: Macroeconomics refers to the vital part of economics. It considers the macro elements of the economy. Like: National Income, GDP, Reserve Bank, Foreign Exchange, Total Demand and Supply etc. It mainly concerns the whole country or world. It also helps to maintain equality in the economy.
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SCOPE OF THE MICROECONOMICS:
1. FUTURE PLANNING: It makes it easy to frame the future policies of the company. Macroeconomics estimates the raw material requirement of a business,No deficiency of raw material problem will occur in future. Raw material is the basic necessity of every business. The microeconomy suggests these ideas from where and how to utilise the raw material. It does not provide an accurate formula but provides some basic information to allocate the resources for production.
2. COST OF PRODUCTION: It generally estimates the cost of production. As it estimates per unit cost and adds the total cost of whole production. It generally focuses on the resources cost, which are used to manufacture the product. It includes the formula: (Total cost = cost of raw material + direct labour cost + cost of overhead). By this we can calculate our cost of production.
3 PRODUCT PRICE: It is the process of estimating the actual cost of product and selling price of product. It also includes other cost rises in producing and selling products in the market. By calculating the cost, please remember, about the customer willingness and his income expenditure.
4. COST THEORY: This theory estimates the payments to receive the goods and services. It is the main concept key of microeconomics + managerial economics. It is used to estimate the monetary value of the company material, assets, risk taking ability and other utilities to purchase goods and services.
5. CONSUMERS BEHAVIOUR: Consumer Behaviour is the study of the Individuals, Groups and related activities which links consumers dealing with the market. It mainly focuses on the consumer attitude, income expenditure, willingness, esteem needs etc. It affects sales of the firm in a direct way.
6. UTILITY OF DEMAND: Utility of demand means or creates the demand in the market. It describes the amount of satisfaction of a consumer. The main focus of the company is to increase its productivity with some extra features, which directly satisfy their needs and wants, when they consume it. It shows the graphical representation of the demand, which help to firm.
SCOPE OF THE MACROECONOMICS:
1. G.D.P: Macroeconomics covers a large part of the whole country’s G.D.P., Which means the Gross Domestic Product of the country. It estimates the gross value of the domestic products of the country. This helps the government of the country. It could be any government like: U.S Government, Indian government etc.
Gross domestic product is an important factor to study, because it shows the country’s growth.
2. NATIONAL INCOME: It is also used to calculate the country’s National Income. This includes all types of income like Taxes, Net Factor Income From Abroad, Net National Income, Gross National Income, and Net Domestic Income. It describes the country’s income (including wages, interest, rent, and profits ). It mainly focuses on the Distribution of income and economic welfare.
3. BALANCE OF PAYMENT: In Macroeconomics, we will also study about the balance of payment. This includes the transactions of payments of one economy to another economy. As an import and export transaction, Rental income, Foreign aid etc. It also target to recover from debt and other borrowing. Use to measure the Total Imports and Exports of the country and try to balance it.
4. EQUILIBRIUM LEVEL: It shows the equal level of demand and supply in the country. It also affects the prices of the products. And make Demand and Supply stable in the economy. It also shows the perfect utilisation of goods and services in the economy. The government can easily control the market without changing its policies and plans.
5. INFLATIONARY GAP: The inflationary gap means increasing the demand from its actual point. When the demand increases and supply decreases. Then this situation rises in the economy. Which leads to rises in the prices of goods and services. This situation was raised in COVID PANDEMIC. Which effect on each and every country of the world. To overcome this problem. The supply should rise in the market till the equilibrium level point. Which will make demand and supply equal in the economy.
6. DEFLATIONARY GAP: The deflationary gap means decreasing the demand from its actual point. When demand decreases and supply increases in the economy. Then Products will remain unsold in the market. It will cause heavy loss. To overcome this problem. The supply should be reduced in the market to make an equal level in the market.
DIFFERENCE BETWEEN MICROECONOMICS vs MACROECONOMICS
| Difference | Microeconomics | Macroeconomics |
| Meaning | It is related to the study of the individual market. It includes the basic concepts of economy. It is the base of the economy. This is the small unit of economy. | It is related to the study of gross concepts and aggregate concepts of the economy. Which is collectively known as the whole study of economy.This is a high level study of the economy. |
| FactorsAffecting | It includes the product, price, cost, elasticity of demand, supply, consumer behaviour, raw material, a market segment. It focuses on the micro elements of the economy. Which centralises the price and product dealing concept of economy. | It includes the national product and income, balancing of payments, banking sectors, foreign policies, and fiscal deficits of the country. It focuses on the macro elements of economy. Which centralise in favourOf the country’s problems and solutions. |
| Advantages | It provides advantages to the single person, business, market segment, as per new solutions and concepts, making it easier to deal in the market.It gives advantages to the local area market. It provides easy techniques to solve the problems rising in the market. Helpful to Mathematicians and Statisticians for new research. Helpful to firm to use the techniques for making policies to increase profit and stability. | It provides advantages to multiple persons at once. Like: government, public, industries etc., which make it easy to deal with national and international trade. It affects both markets: small and large. It provides easy techniques to various parties like the government, industries etc. To solve the problems rising in the country, whether it is the unemployment in the country. Helpful to the Staticians and the Researchers, who research the new tools of the country. Helpful to frame policies by the government for annual plans and 5 years plans. |
| Theories | It considers the: PRODUCTION THEORY, PRICE THEORY, COST THEORY, CONSUMERS AND DEMAND THEORY. | It has not specific theory, but it also considers some basic theorems like: AGGREGATE THEORY, FOREIGN RELATION, BANKING THEORIES etc |
| Limitations | It considers only small area, not vast area.Microeconomics techniques are difficult to calculate. Wrong estimates create big problems. It is difficult to estimate the small concepts like a person’s needs and wants. | It considers only large parts or factors.Macroeconomics does not consider the specified techniques. Only helpful to government sectors and MNCIf errors are generated, it can affect the whole estimations, which creates problems in the future. |
Conclusion:
In this, we get to know about Microeconomics vs Macroeconomics, which is an important part of the study of economy. We study the meaning of microeconomics, which is the nuclear component of economics deals. Here the economics gets started. The study of Macroeconomics deals with the whole part of economics. From here, the new branches are explored at different levels. Through this, you can learn the components of both parts of economics with their differences.