Microeconomics and macroeconomics

Microeconomics analyzes the economy on a smaller scale, it deals with specific entities , such as companies, families and individuals. Macroeconomics looks at the economy in a broad sense , dealing with factors that affect the national, regional, or global economy as a whole.

MicroeconomicsMacroeconomy
 

Meaning

The branch of economics that studies the behavior of an individual consumer, company or family.The branch of economics that studies the behavior of the entire economy, national and international.
Works withIndividual economic variables.Aggregate economic variables.
AppApplied in operational or internal matters.Applied in environmental and external issues.
ScopeIssues such as individual product, demand, supply, product prices, wages, among others, are addressed.Issues such as national income, general price level, distribution, national production, among others, are addressed.
ImportanceUseful in determining the prices of a product, along with the prices of the factors of production (land, labor, capital, among others) within the economy.It maintains stability in the general price level and solves the main problems of the economy such as inflation, deflation, stagflation, unemployment and poverty as a whole.
PricesMicroeconomics determines the price of a certain commodity, along with the prices of complementary and substitute goods.Macroeconomics is useful to maintain the general level of prices.
Economy analysisMade from the bottom up.Made from top to bottom.
Example of topics coveredHow the price of a certain merchandise will affect the quantity of its demanded.How GDP could be affected by the unemployment rate.

What is microeconomics?

Microeconomics is the branch of economics that studies the behavior and performance of individual units , that is, consumers, family, industry and companies.

It also looks at the decisions that those individual units make regarding the allocation of resources and prices of goods and services.

To do this, microeconomics focuses on supply and demand, and other factors that determine price levels.

For example, microeconomics would examine how a specific firm could maximize its production and capacity so that it could lower prices and better compete in its sector.

Advantages and disadvantages of microeconomics

Advantage

  • It helps in determining the prices of a certain product and also in the prices of various factors of production.
  • It is based on a free enterprise economy, which means that the company is independent to make decisions.

Disadvantages

  • The full employment assumption is unrealistic.
  • It analyzes only a small part of an economy, while a larger part is not studied.

What is macroeconomics?

Macroeconomics, on the other hand, is the field that studies the behavior of the economy as a whole , and not just specific companies.

Includes regional, national and international economies. It covers the main areas of the economy, such as unemployment, poverty, general price level, GDP (gross domestic product), imports and exports, economic growth, globalization, monetary and fiscal policy, among others.

For example, macroeconomics would examine how an increase or decrease in exports would affect a nation’s capital, or how GDP would be affected by the unemployment rate.

Advantages and disadvantages of macroeconomics

Advantage

  • It is useful for determining the balance of payments, together with the causes of the deficit and surpluses.
  • Makes decisions regarding economic and fiscal policies, and resolves issues of public finances.

Disadvantages

  • It only covers the added variables.

See also: Supply and demand

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