Difference Between Micro and Macro Economics

Difference Between Micro and Macro Economics

As a prominent branch of Social Science, Economics mainly studies how the society uses limited resources as well as the production, consumption and distribution of goods and Economics is divided into two branches, namely, Macroeconomics and Microeconomics. Microeconomics focuses on how businesses and individuals take decisions regarding prices, allocation of resources, budgeting, etc. Macroeconomics looks at the wider picture by factoring in the economy and government decisions of a country as a whole. Through this blog, we will explore the key points of difference between Micro and Macro Economics.

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What is Microeconomics?

Microeconomics is a branch of economics that studies the behaviour of individuals and businesses. Further, it focuses on different aspects of how decisions are made based on the allocation of limited resources. It studies the pattern of demand and supply as well as the determination of output and price in individual markets. Before delving deeper into the difference between Micro and Macro Economics, let’s first explore the key components of Microeconomics.

The various key principles it comprises are,

  • Production Theory: This theory postulates the study of how goods and services are manufactured or produced.
  • Demand, Supply, and Equilibrium: Prices are decided by the principles of supply and demand. Under this method, suppliers give the same rate or price as demanded by buyers or customers in a perfectly competitive market. This produces an economic balance between the supply and demand.
  • Costs of Production: This principle determines the cost of goods and services that is restricted by the cost of the supplies utilised during the production phase.
  • Labor Economics: This concept of economics that encompasses the basic principles of workers and employers, and examines the pattern and model of employment, wages and income.

What is Macroeconomics?

The word ‘Macro’  is derived from the Greek word ‘Makro’ (meaning “large”) and combining it with economics, this branch deals with the production, performance, behaviour, structure, and decision-making of an economy as a combination of all entities, rather than individual firms or markets. This comprises different types of economy including national, territorial, and world economies. At the school level, Macroeconomics and Microeconomics are studied under the Commerce and Arts stream subjects. Further, Class 12 Macroeconomics syllabus essentially explores the process of generating Gross Domestic Product (GDP). Further, you will also get to learn about the causes and effects of changes in national income, unemployment, growth rate, and price levels. The key point of difference between Micro and Macro Economics is that Microeconomics stays limited to the individual level and Macroeconomics peruses the economy as a whole.

Some of the major factors you will get study in Macroeconomics are:

  • Gross Domestic Product (GDP): As one of the prime indicators, it is used to measure the strength of a nation’s economy. GDP is the fiscal value of all the finished goods and services rendered within a country’s boundaries.
  • National Income: It is an economic indicator that determines the correct picture of the economy and purchasing ability of people in the nation. It represents the sum of profits, wages, interest rents and pension payments to citizens of the country.
  • Unemployment: This factor depicts the measurement of unemployment of people in the country and the rate which people look for work or job is the unemployment rate. This rate is equivalent to the number of unemployed people divided by the labour force.
  • Economic Growth: Economic growth is the positive effect of GDP on the economy of a country that increases the market value of the goods and services produced by an economy over a certain period of time.
  • Inflation: This results in the loss of value of money and depreciation the economic growth and it is usually caused when goods and services are in high demand, creating a drop in the availability of goods and services and hence customers have to pay more for the products and services 

Examples of Micro and Macroeconomics

There are numerous examples of Micro and Macroeconomics across factors, aspects and economic activities. Here are the examples of Micro and Macroeconomics:

Examples of Microeconomics

  • Inflation
  • GDP
  • Unemployment rates
  • Economic outputs
  • Price Stability
  • Goods
  • Productivity
  • Stability

Examples of Macroeconomics

  • Supply
  • Demand
  • Prices
  • Elasticity
  • Competition
  • Opportunity Cost
  • Competitive Advantage
  • Consumer Choice
  • Welfare Economics

Understanding the Difference Between Micro and Macro Economics

Difference Between Micro and Macro Economics
Difference Between Micro and Macro Economics

Now that you are familiarised with what Microeconomics and Macroeconomics mean, let’s explore the points of difference between Micro and Macro Economics.

Basis of Difference Between Micro & Macro EconomicsMacroeconomicsMicroeconomics
DefinitionIt aims to study the economy as a
whole and covers different market segments.
Focusing on an individual level, Microeconomics studies
a specific market segment
in an economy.
Central ApproachTakes an expansive approach by studying the whole economy. More of an individual-centric
as it is concerned
with businesses and households
and analyses consumer behaviour,
resource allocation and human choices.
Concerned withAlso called as the income theory
because it describes the changing
levels of national income of
an economy during a certain
period of time.
Referred to as the price theory,
it deals with factor pricing
such as rent, interest, wage, profits, etc.
for land, labour, capital and
enterprise and explains how different
prices are decided.
FactorsNational income, GDP, distribution, employment, general price level, money, etcDemand, supply, factor pricing,
product pricing, economic welfare,
production, consumption, etc.
ImportancePreserves stability in the broad
price level and solves the major
issues of the economy
like deflation, inflation, rising prices (reflation), unemployment and poverty, etc.
Plays a significant role in regulating
the prices of a product

alongside the prices of various factors of production (labour, land, entrepreneur, capital, etc) within the economy.
ApplicationsIt helps in strengthening policies and uniform resource distribution at the economy level such as
unemployment, inflation level etc.
It helps in developing policies
to facilitate appropriate resource
distribution at the firm level
ExamplesNational Income & Savings;
Aggregate Demand;
Inflation Rates, GDP;
Rate of Employment, Poverty, etc.
Individual Income & Savings;
Determining the price of a
specific good or commodity;
Consumer Equilibrium;
Output generated and produced
by a specific firm.

Relationship Between Micro and Macroeconomics

The similarities between Micro and Macroeconomics are based on the factor that they both study the different economic problems.

Microeconomics studies the economic problem of scarcity and choice at an individual level and how an individual makes these economic decisions and Macroeconomics expands it further to the economy as a whole thus studying how a country is able to take large-scale decisions of making economic budgets, tackling inflation, competition across markets and much more. The relationship between Micro and Macroeconomics is that they are dependent on each other because microeconomic variables largely rely on macroeconomic variables and similarly macroeconomics depend on the microeconomic variables in an economy.

For example, every individual’s income (microeconomic variable) in an economy would largely the national income (macroeconomic variable) and on the other hand, the overall inflation rate (macroeconomic variable) would also affect the purchasing power of an individual (microeconomic variable) in an economy.


Hence, we hope that this blog helped you learn about the major points of difference between Micro and Macro Economics. Planning to study a degree in Economics? Let our Leverage Edu experts guide you in choosing the right program and university that can equip you with the required knowledge, skills and exposure to build a rewarding career in Economics. Sign up for an e-meeting today.

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