Introduction
The study of economics has to consider the financial world as a whole while also looking at the behavior of people to see how they make purchasing decisions. It is usually described as a science that considers the use of scarce resources, but the concepts contained in this definition are very broad (The Economics Detective, 2012a). Therefore, the field of research is divided into two main categories – micro- and macroeconomics.
Both of these branches are based on the same principles, as they consider human philosophy and behavior to establish how the economy changes under different external and internal influences (Khan Academy, 2012). From these concepts, economists derive mathematical formulas and visualize ideas to predict future issues or find patterns. However, the two branches also have their unique features, as they consider different subjects, theories, and benefits for the economy.
Fundamental Differences Between Microeconomics and Macroeconomics
Microeconomics is a discipline that concentrates on investigating the behavior of individual actors – people, companies, or markets – and using this knowledge to predict their actions in relation to the use of resources. This branch of economics deals with decision-making, as many of the products and materials society uses are scarce (Whelan & Msefer, 1996). Therefore, people have to think about how to use these resources efficiently and look at other factors that influence the world.
Microeconomics relies on patterns of human behavior to create its most popular theories, one of the fundamental approaches being the relationship between supply and demand (The Economics Detective, 2012b). Demand is the need that agents express to obtain a certain item or service, while supply describes the decision of producers to create and deliver these products (The Economics Detective, 2012b). Supply and demand levels lie at the center of the economy and predict prices, imports, exports, and other essential activities on all market levels.
The field of microeconomics also looks at other important concepts, such as the value of goods, their production efficiency and quality, and the motivations behind agent collaboration. The key principles of this discipline determine how products are designed, manufactured, priced, and sold (Mankiw, 2020). Furthermore, microeconomics examines people’s wages, labor, employment, and other parts of their finances-related jobs (Khan Academy, 2012).
As a result, this branch is invaluable to the local and international economy. Microeconomists create predictions for businesses and markets and determine which goods are the most likely to appeal to consumers. The economy built on the supply-demand relationship is aware of the trends in human behavior and recognizes the factors that influence people’s decisions. The theories used in microeconomics create potential scenarios and have the possibility of predicting major events in the market or people’s changing needs.
While microeconomics is interested in individual lives and actions, macroeconomics is focused on the overall state of the economy. Using a top-down approach, specialists in this field ask questions about the whole country and its use of financial and other resources (The Economics Detective, 2012a). For instance, a macroeconomist may consider the rate of inflation in the state and examine the national rate of unemployment changes. Rather than centering on the decision-making of one specific market or company, this branch investigates how broad trends affect the entire nation or the whole world (Khan Academy, 2012). As an outcome, such estimations reveal long-term possibilities and risks and create a foundation for how governments should or should not act. Macroeconomics creates new economic policies to promote a country’s growth and prosperity.
The Importance of Microeconomics and Macroeconomics in the Economy
As can be seen from the descriptions of both branches, micro- and macro-economics have their own unique points of focus. However, they are both vital for the economy as they outline the main trends and patterns necessary for the success of the economic system (Khan Academy, 2012). Microeconomics uncovers how small decisions by individual agents impact the broader economy. For instance, this discipline can help economists find problems in the markets and recommend solutions.
Simultaneously, macroeconomics provides one with a view of how government decisions impact the lives of consumers in a country. It assists government leaders in making decisions that determine the future of the country and its people (The Economics Detective, 2012a). The segments of this science use different theories and approaches, but the result of their combined knowledge shapes the economy and helps it maintain balance.
Conclusion
In conclusion, macro- and microeconomics are two science branches that deal with the different aspects of the economy. Microeconomics focuses on individual behavior, considering how agents contribute to the market activity and create new trends. Macroeconomics is interested in examining significant changes and decisions on a countrywide level, shaping policy and long-term goals for a nation.
While both use their own theories and concepts, these parts of economics are based on the simplification of philosophy and the use of math as a tool for presenting the results in the form of numbers and formulas. Both fields are vital for the economy as they reveal the main issues, opportunities, and patterns in human behavior and examine the relationship between government activity and the country’s financial performance.
References
Khan Academy. (2012). Introduction to economics | Supply, demand, and market equilibrium | Economics | Khan Academy [Video]. YouTube. Web.
Mankiw, N. G. (2020). Principles of economics (9th ed.). Cengage Learning.
The Economics Detective. (2012a). What is economics? [Video]. YouTube. Web.
The Economics Detective. (2012b). Supply and demand [Video]. YouTube. Web.
Whelan, J., & Msefer, K. (1996). Economic supply & demand. MIT.
Loading...
