2nd Bac - Microeconomics and Macroeconomics

 Microeconomics and Macroeconomics

 

Microeconomics and macroeconomics are two of the largest subdivisions of the study of economics wherein micro- refers to the observation of small economic units like the effects of government regulations on individual markets and consumer decision making and macro- refers to the "big picture" version of economics like how interest rates are determines and why some countries' economies grow faster than others'.

 

Microeconomics: Individual Markets 

 

Those who have studied Latin know that the prefix “micro- “means “small,” so it shouldn’t be surprising that microeconomics is the study of small economic units. The field of microeconomics is concerned with things like:

 

  • consumer decision making and utility maximization
  • firm production and profit maximization
  • individual market equilibrium
  • effects of government regulation on individual markets
  • externalities and other market side effects

 

Microeconomics concerns itself with the behavior of individual markets, such as the markets for oranges, the market for cable television, or the market for skilled workers as opposed to the overall markets for produce, electronics, or the entire workforce. Microeconomics is essential for local governance, business and personal financing, specific stock investment research, and individual market predictions for venture capitalistic activities.

 

Macroeconomics: The Big Picture 

 

Macroeconomics, on the other hand, can be thought of as the “big picture” version of economics. Rather than analyzing individual markets, macroeconomics focuses on aggregate production and consumption in an economy, the overall statistics that macroeconomists miss. Some topics that macroeconomists study include:

 

  • effects of general taxes such as income and sales taxes on output and prices
  • causes of economic upswings and downturns
  • effects of monetary and fiscal policy on economic health
  • effects of and process for determining interest rates
  • causes for some economies growing faster than other economies

 

To study economics at this level, researchers must be able to combine different goods and services produced in a way that reflects their relative contributions to aggregate output. This is generally done using the concept of the gross domestic product (GDP), and goods and services get weighted by their market prices.

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