Difference between microeconomics and macroeconomics

• Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms.
• Macro economics is the study of the whole economy. It looks at ‘aggregate’ variables, such as aggregate demand, national output and inflation.

• Micro economics involves

  • Supply and demand in individual markets.
  • Individual consumer behaviour. e.g. Consumer choice theory
  • Individual labour markets – e.g. demand for labour, wage determination.
  • Externalities arising from production and consumption. e.g. Externalities

  Macro economics involves

  • Monetary / fiscal policy. e.g. what effect does interest rates have on the whole economy?
  • Reasons for inflation and unemployment.
  • Economic growth
  • International trade and globalisation
  • Reasons for differences in living standards and economic growth between countries.
  • Government borrowing

  Moving from micro to macro

  If we look at a simple supply and demand diagram for motor cars. Microeconomics is concerned with issues such as the impact of an increase in demand for cars.
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  This micro economic analysis shows that the increased demand leads to higher price and higher quantity.