MICRO & MACRO ECONOMICS

Micro Economics

Definition :

       The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets (e.g. coffee industry).

Market Interaction :

       The strength of microeconomics comes from the simplicity of its underlying structure and its close touch with the real world. In a nutshell, microeconomics has to do with supply and demand, and with the way they interact in various markets. Microeconomic analysis moves easily and painlessly from one topic to another and lies at the center of most of the recognized subfields of economics. Labor economics, for example, is built largely on the analysis of the supply and demand for labor of different types. The field of industrial organization deals with the different mechanisms (monopoly, cartels, different types of competitive behavior) by which goods and services are sold. International economics worries about the demand and supply of individual traded commodities, as well as of a country’s exports and imports taken as a whole, and the consequent demand for and supply of foreign exchange. Agricultural economics deals with the demand and supply of agricultural products and of farmland, farm labor, and the other factors of production involved in agriculture.

Macro Economics 

Definition: 

      The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.

Market Interaction:

      The role of macroeconomics in business can be seen in way the condition of the economy affects individual businesses. For instance, during a recession, the behavior of customers and consumers of goods and services change to reflect the change in the economy. Such changes can be seen in the way the demand for goods and services drop and the manner in which such a reduction affects the balance sheets of the various businesses. An example of the role of macroeconomics in business is the way in which the reduction or increase in demand for products affects the decisions by companies to expand or to scale down their rate of production. For instance, a boom in the economy may lead to a demand for goods. Then companies will increase production, hire more employees and even expand their businesses, all with the aim of meeting up with the increase in demand.