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by: CHRIS AROKIUM

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This picture of a chart defining what 'micro' and 'macro' economics, is a great way to not only understand the meaning of the two subjects, but the differences as well.

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Macroeconomics deals with the grand scale of economy. No better representation of that then this graphic of a city skyline. It draws attention with its neon lighting and colorful lines throughout the picture.

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A great representation of Microeconomics, this mind map or word bubble graphically illustrates the realm of Microeconomics, and the most important terms to know.

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This website points out the contrasts of micro and macroeconomics. The main differences between microeconomics and macroeconomics. Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behavior, individual labor markets, and the theory of firms. Macro economics is the study of the whole economy. That is,  relating the phenomena of output, unemployment, and inflation, and how it effects workers, consumers, and producers.

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Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms.

Macro economics is the study of the whole economy. It looks at 'aggregate' variables, such as aggregate demand, national output and inflation.

Micro economics is concerned with:
Macro economics is concerned with

Monetary / fiscal policy. e.g. what effect does interest rates have on the whole economy?

Reasons for inflation and unemployment.

Economic growth

International trade and globalisation

Reasons for differences in living standards and economic growth between countries.

Government borrowing

Moving from Micro to Macro

If we look at a simple supply and demand diagram for motor cars. Microeconomics is concerned with issues such as the impact of an increase in demand for cars.

This micro economic analysis shows that the increased demand leads to higher price and higher quantity.
Macro economic analysis
This looks at all goods and services produced in the economy.

The macro diagram is looking at Real GDP (which is the total amount of output produced in the economy) instead of quantity.

Instead of the price of a good, we are looking at the overall price level (PL) for the economy. Inflation measures the annual % change in the aggregate price level.

Instead of just looking at individual demand for cars, we are looking at aggregate demand (AD) - total demand in the economy.

Macro diagrams are based on the same principles as micro diagrams; we just look at Real GDP rather than quantity and Inflation rather than Price Level (PL)

The main differences between micro and macro economics

1. Small segment of economy vs whole aggregate economy.

2. Microeconomics works on the principle that markets soon create equilibrium. In macro economics, the economy may be in a state of disequilibrium (boom or recession) for a longer period.

3. There is little debate about the basic principles of micro-economics. Macro economics is more contentious. There are different schools of macro economics offering different explanations (e.g. Keynesian, Monetarist, Austrian, Real Business cycle e.t.c).

4. Macro economics places greater emphasis on empirical data and trying to explain it. Micro economics tends to work from theory first.

Differences between microeconomics and macroeconomics

The main difference is that micro looks at small segments and macro looks at the whole economy. But, there are other differences.
Equilibrium - Disequilibrium
Classical economic analysis assumes that markets return to equilibrium (S=D). If demand increases faster than supply, this causes price to rise, and firms respond by increasing supply. For a long time, it was assumed that the macro economy behaved in the same way as micro economic analysis. Before, the 1930s, there wasn't really a separate branch of economics called macroeconomics.
Great Depression and birth of Macroeconomics
In the 1930s, economies were clearly not in equilibrium. There was high unemployment, output was below capacity, and there was a state of disequilibrium. Classical economics didn't really have an explanation for this dis-equilibrium, which from a micro perspective, shouldn't occur.

In 1936, J.M.Keynes produced his The General Theory of Employment, Interest and Money; this examined why the depression was lasting so long. It examined why we can be in a state of disequilibrium in the macro economy. Keynes observed that we could have a negative output gap (disequilibrium in the macro-economy) for a prolonged time. In other words, microeconomic principles of markets clearing, didn't necessarily apply to macro economics. Keynes wasn't the only economist to investigate this new branch of economics. For example, Irving Fisher examined the role of debt deflation in explaining the great depression. But, Keynes' theory was the most wide-ranging explanation and played a large role in creating the new branch of macro-economics.

Since 1936, macroeconomics developed as a separate strand within economics. There have been competing explanations for issues such as inflation, recessions and economic growth.

Similarities between microeconomics and macroeconomics

Although it is convenient to split up economics into two branches - microeconomics and macroeconomics, it is to some extent an artificial divide.

1. Micro principles are used in macro economics. If you study the impact of devaluation, you are likely to use same economic principles, such as the elasticity of demand to changes in price.

2. Micro effects macro economics and vice versa. If we see a rise in oil prices, this will have a significant impact on cost-push inflation. If technology reduces costs, this enables faster economic growth.

3. Blurring of distinction. If house prices rise, this is a micro economic effect for the housing market. But, the housing market is so influential that it could also be considered a macro-economic variable, and will influence monetary policy.

4. There have been efforts to use computer models of household behaviour to predict the impact on the macro economy.

Related External Links
Last updated 1 July, 2017.

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Difference between microeconomics and macroeconomics - Economics Help

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Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms. Macro economics is the study of the whole economy. It looks at 'aggregate' variables, such as aggregate demand, national output and inflation.

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Once again I chose this website to highlight important topics the reader can learn about Macroeconomics. Macroeconomics is the study of aggregated indicators such as GDP, unemployment rates, national income, price indices, and the interrelations among the different sectors of the economy to better understand how the whole economy functions. Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance.

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Microeconomics stands in contrast to macroeconomics, which involves "the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national policies relating to these issues". Microeconomics also deals with the effects of economic policies (such as changing taxation levels) on the aforementioned aspects of the economy.

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Microeconomics covers the local and small business sectors of the economy. This website is the encyclopedia of all things microeconomics. The reader will study aggregated indicators such as GDP, unemployment rates, national income, price indices, and the interrelations among the different sectors of the economy to better understand how the whole economy functions. Microeconomics is primarily focused on the actions of individual businesses, such as firms and consumers, and how their behavior determines prices and quantities in specific markets.

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While macroeconomics is a broad field of study, there are two areas of research that are emblematic of the discipline: the attempt to understand the causes and consequences of short-run fluctuations in national income (the business cycle), and the attempt to understand the determinants of long-run economic growth (increases in national income).

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In this video, the viewer will learn about and look at the fundamental differences between microeconomics and macroeconomics. A short video that offers a quick overview of making better choices living. Which choices you should make and how you should make them so that our living standards are better. This video also uncovers and analyzes the various sectors of the economy whether it is general or private sectors.
TUNE IN!

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See more videos at: http://talkboard.com.au/ In this video, we look at the fundamental differences between microeconomics and macroeconomics.

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In macro economics, you learn about how the government manages all the businesses with the federal bank and the other tools they have, also how a single market manages itself and competition between all the businesses in the market. Viewers will be exposed to the different types of unemployment, the three stages our economy can be in, aggregate supply features and many more topics covering Macroeconomics. What happens to our economy if there is a decrease in interest rate and an increase in resources.

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In this video I explain Macroeconomics in 15 minutes. Click on the box to watch videos covering each concept and graph or click on the playlists below. Make sure to subscribe and comment.

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This video is a great fountain of information for those who are interested in Microeconomics. Viewers will learn  about terms such has Scarcity, Trade-offs and opportunity cost. And learn concepts such has the shifters of PPC, elasticity, and utility maximization.  In micro economics you learn about everything that goes into managing a local small business or community of business. The author of this video does a great job of highlighting all of the important topics regarding this topic.

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Perfect Competition Monopoly Graph Review

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In this video I reviews all of MICROeconomics in 19 minutes. (Note- I used the same intro from the macro video since Unit 1 is the same, but this definitely covers MICRO). Click on the box to learn about specific topics/graphs or watch the playlists below. Please Subscribe!

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This presentation will creatively inform you about 'micro' and 'macro' economics for the beginning learner.