Microeconomics and Macroeconomics

According to modern economic analysis, the subject matter of economics is mainly divided into two parts: microeconomics and macroeconomics.

These are discussed below:

Microeconomics

The English word 'micro' originates from the Greek word 'mikros'. Its meaning is tiny or small. Therefore, microeconomics can be defined as the branch of economics that studies small or individual economic units or sectors. 

It is also called sukshma arthashastra, meaning 'microeconomics'. Thus, microeconomics studies individual or specific goods and specific resources. It only studies a single market or a single consumer or a single industry. 

Therefore, microeconomics studies small activities or units in the economic world. 

According to Professor Kenneth Ewart Boulding, "Microeconomics is the study of particular households, particular prices, wages, incomes, particular industries, particular commodities." 

The main subject matter of microeconomics is how the price of goods and services is determined in the market. The study of demand and supply affected by these prices are also its main subject matters. Therefore, it is also called 'price theory'. 

According to Professor Schultze, "Price theory is the main tool of microeconomics."

Macroeconomics

The English word 'macro' originates from the Greek word 'makros', which means broad or large. 

Therefore, macroeconomics can be defined as the branch of economics that studies large or aggregate economic units or sectors. It is also called brihat arthashastra, meaning 'macroeconomics'. 

Macroeconomics studies the overall form of the economy. Macroeconomics studies the entire economy or the total and average values related to it. Thus, macroeconomics studies total national income, total savings, total employment, and total consumption, etc. 

Therefore, under macroeconomics, we study the aggregate form of the economy. 

For example, the study of the income of a single family and the production of a single firm falls under microeconomics, while the study of the total income of the nation and the production of the entire industry falls under macroeconomics. 

Professor Kenneth Ewart Boulding defined macroeconomics as follows: "Macroeconomics deals with aggregates of these quantities, not with individual incomes but with national income, not with individual prices but with price levels, not with individual output but with national output." 

Since macroeconomics studies the income, employment, and production of the entire economy, it is also called 'the theory of income, output, and employment'.

Differences Between Microeconomics and Macroeconomics

Although microeconomics and macroeconomics are interrelated, there are some differences between them. These are mentioned below:

(a) The English word 'micro' originates from the Greek word 'mikros'. Its meaning is small. Therefore, microeconomics studies small or individual economic units. On the other hand, the English word 'macro' originates from the Greek word 'makros'. Its meaning is large. Therefore, macroeconomics studies large or aggregate economic variables.

(b) The branch of economics that studies individual economic units is called microeconomics, while the branch of economics that studies the overall economy is called macroeconomics.

(c) The subject matter of microeconomics includes the income of a family, the price of a good, the wage of a worker, the income of a person, the production of a firm or industry, etc., while the subject matter of macroeconomics includes national income, total national production, per capita income, total savings, total employment, and total consumption, etc.

(d) In microeconomics, the study focuses on how the price of a good or resource is determined, hence it is also called the theory of price determination. In macroeconomics, the study focuses on the income, employment, and production of the entire economy, hence it is also called the theory of income and employment. 

For example, the study of the income and expenditure of a family for a year is done in microeconomics, while the study of the income and expenditure of all households in the country is done in macroeconomics.