Difference Between Macroeconomics and Microeconomics
- What is the difference between macroeconomics and microeconomics?
- What do macro and microeconomics study?
- Examples of macroeconomic and microeconomic variables
The difference between microeconomics and macroeconomics is that the former is about the particular, while the latter is about the whole. These are the two main branches of the economy.
To see the difference, simply separate the two words. The words macro and micro come from the Greek. Macro means large and micro means small.
Therefore, macroeconomics is the economy of the big ones and microeconomics is the economy of the little ones.
Macroe and microeconomics are two very popular concepts in economics. One of the first curiosities of those who enter the economic world is to know their difference.
What do macroeconomics and microeconomics study?
Microeconomics studies individual variables. That is, the behavior of economic agents separately. For example, a consumer’s decision to buy a mobile phone is studied by microeconomics. Another example would be the decision of a company to invest or not to invest or the study of the profit of a specific company.
Macroeconomics studies what we in economics call aggregate variables. That is, variables that are the sum of many small variables. For example, gross domestic product (GDP) is a macroeconomic variable. To simplify, if we have 10 people in a country and each produces 2 units, the GDP will be 20 units. The output of each of 10 people (2 units) is studied by microeconomics, while the sum of the whole is studied by macroeconomics.
Here are examples of variables in macro and microeconomics.
Examples of variables in macroeconomics:
- Gross Domestic Product (GDP).
- Balance of payments.
- Private debt.
- Public debt.
- Public deficit.
- Unemployment rate.
There are many more, but the variables above are some of the best known.
Examples of variables in microeconomics:
- Production of a company.
- Debt of a company.
- Business expense.
- Consumption of a dwelling.
- Salary of a worker.
- Consumer preferences.
- Consumer tastes.
- Personal savings.
- Amount of a personal investment.
- Risk aversion.