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Topic: Micro and Macro Economics part 1 Economics Notes  (Read 8252 times)
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« on: July 16, 2010, 12:50:14 PM »

Micro and Macro Economics

Qs. Explain the Macro and Micro analysis in Economics
Distinguish between Micro and Macro Economics and show their inter-dependence
Define Micro Economics and discuss its importance and limitations

Allocations of scar resources in order to get maximum satisfaction is called economics.
Economics is further divide into two parts.
1. Micro Economics
2. Macro Economics
Micro deals with individual single or particular consumer, producer, firm, industry or
While Macro deals with as whole like National income, employment level etc.
Micro Economics is called Price Theory and Macro Economics is called Income theory.
Price theory explains the composition or allocation of total production.

Qs. Income theory explain the level of total production and why the level of total
production and why the level rises and falls.

Micro Economics

In economics micro means single, individual or particular. Micro Economics means deals with
single, Individual or particular consumer produce or Market etc. In conducting economics
analysis, micro economics approach is on micro basis, generally an assumption of full
employment in the economy as whole is made.

Importance of Micro Economics
Micro Economics has both theoritical and practical importance. From the theoritical point of
view it explain the function of a free intense economics it tells as how consumer and
producer take the decision for million of goods and services to consume and produce. It
tells us how goods and services distributed among them. It explain the determination of the
relative prices of various goods and services. For Practical importance micro economics
helps in the formulation of economics policies calculated to promote efficiency in
production and welfare of the masses.
In professor Lerner's words
Micro Economics theory facilities the understanding of what would be a hopelessly
complicated consfussion of billions of facts by constructing simplified model of

Limitation of Micro Economics
Micro Economics has same limitations.
A. It cannot give an idea of the functioning of the economy as whole.
B. It assume fall employment which is rare phenomena, it is therefore, an unrealistic
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==Macro Economics Or the Theory of Income and Employment
Macro Economics deals as whole such as National Income employment, saving investment, total
consumption, price level.
Macro Economics deals also with how an economy group. It determines the chief economic
development and the various stages and process of economics growth. Study of macro economics
is very important to get proper view of an economy.

Limitation of Macro Analysis
If has limitation of its own:
A. Individual is ignored altogether.
B. The Macro analysis over looks individuals difference for instance the price level may be
stable but the prices of food grains may have gone up.
C. While speaking of the aggregate it is also essential to remember the nature compound and
structure of the components.

Need for Integrating Macro and Micro Economics
Micro and Macro Economics can't give adequate way to analysis the working of the economics
system. So if we wish to get solutions of our main economics solution we should have to
integrate the two approaches. We apply proper Integration of the Micro and Macro approaches
because there are few macro problems which have no micro elements involved and few micro
problems that are without macro aspects.


Thus if proves that subject matter of economics includes price theory (or micro economics),
income and employment theory (macro economics) and growth theory.
Simply we can say economics is a study of economics system under which men work and live.
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