Difference between Micro and Macro Economics.pptx

between Micro and Macro Economics

1. Topic : Micro and Macro economics Welcome to My Class COURSE NO – 504, 29 th BATCH, DEPARTMENT OF GOVERNMENT & POLITICS, JAHANGIRNAGAR UNIVERSITY

2. Scope of Economics The study of economics is divided by the modern economist into two parts: Micro Economics and Macro Economics

3. Scholars’ Definition The English word “micro” is derived/ originated from the ancient Greek word ‘mikros’, which indicates ‘small’. “Microeconomics is the study of the economic actions of individuals and well-defined groups of individuals . ” – Henderson and Richard E. Quandt “Microeconomics is the study of particular households, individual prices, wages, incomes, individual industries, particular commodities.”– K.E. Boulding “Microeconomics is the branch of economics that studies parts of the economy.”– O.M. Amos

4. Micro-economics While an analysis of the behavior of any particular decision making unit, such as households, firm, an industry, a consumer, constitutes that is called micro economics. Example: consumers/ buyers behavior analysis or a single product pricing or define equilibrium of an industry/ firm, etc.

5. Micro-economics The word ‘Micro’ means a millionth part. When we speak of micro economics or the micro approach, what we mean is that it is some small part or component of the whole economy that we are analyzing . For example, we may be studying an individual consumer’s behavior or that of an individual firm or what happens in any particular industry. If it be an analysis of price, in micro economic what we study is the price of a particular product or of a particular factor of production and not the general price level in the country.

6. Micro-economics Likewise, the income of an individual or of an industry, and not the national income of a country, comes within the purview of micro economics. In respect of employment, it is the employment in a firm or in an industry that is considered in a micro economics and not the aggregate employment in the whole economy.

7. Micro-economics A noteworthy feature of micro approach is that, while conducting economic analysis on a micro basis, generally an assumption of full employment in the economy as a whole is made. On that assumption, the economic problem is mainly that of resource allocation or of theory of price. That is why, till recently, Economics concerned itself mainly with the theory of value and distribution, and ignored the study of economic system as a whole.

8. Micro-economics: Limitations Micro-economic analysis suffers from certain limitations : It cannot give an idea of the functioning of the economy as a whole . An individual industry may be flourishing, whereas the economy as a whole may be languishing(failing) Unrealistic

9. Macro economics & Scholars Definition The English word “macro” is derived from the ancient Greek word “Makros” that means ‘large’. “ Macro economics deals not with individual quantities as such but with aggregates of these quantities, not with individual income but with national income, not with individual price but with the price-level, not with individual output but with national output.”– K.E. Boulding “Macro economics is the branch of economics that studies the entire economy.”– O.M. Amos

10. Macro-economics When we are analyzing the problems of the economy as whole it is macro economic study. In macro-economics, as it were, the forest, whereas in micro economics we study the trees. Macro-economics is concerned with aggregate or averages of the entire economy, such as national income, aggregate demand, aggregate supply, aggregate output, total employment, total consumption, savings and investment, and general price level , etc. Example: Gross national income, aggregate employment, gross investment, aggregate demand, aggregate supply, total consumption, general price level etc.

11. Macro-economics In other words, in macro-economics, we study how these aggregate and averages of the economy as a whole are determined what causes fluctuations( Variations/ instabilities) in them. Macro-economic deals also with how an economy grows. In other words, it analyses the chief determinants of the economic development and the various stages and process of economic growth.

12. Macro-economics: Limitations Individual is ignored altogether which is the main aim of Economics The macro-analysis overlooks individual differences. For instance, the general price level may be stable, but the prices of food grains may have gone spelling ruin to the poor

13. Differences between Micro and Macro Economics 1.Definition 2. Origin : Micro derived from a Greek word “Mikros” On the other hand Macro economics derived from a Greek word “Makros” 3. Scope : The Scope of Micro economics is limited. On the other hand, comparatively the scope of macro economics is large.

14. Differences between micro and macro economics Methods of equilibrium : In micro economics analysis any individual / firm activities/ behavior that is partial equilibrium. In macro economics analysis the holistic variables behavior on the basis of total equilibrium. Variable : The variables of Micro economics are related to unit of economic system. On the other hand the variables of macro economics are related to the whole economic system. Price theory and Income theory: Micro economics called price theory .On the other hand macro economics called income theory.” price theory explains the composition, or allocation, of total production- why more of some things is produced than of others. Income theory explains the level of total production and why the level rises and falls.”

15. Differences between micro and macro Analyzing method: While an analysis of the behavior of any particular decision making unit such as a firm and industry, a consumer, constitutes micro economics. On the other hand, when we are analyzing the problems of the economy as a whole it is macro economic study. Unrealistic assumption ( Micro economics) Micro economics shows partial scenario Macro economics shows the whole scenario of a country’s economy

16. Difference between Micro and macro economics Analysis : Joint Variable Economic Scenario Importance Differentiate to model

17. Distinguish between micro and macro Thanks All