It focuses on broad issues such as growth, unemployment, inflation, and trade balance. There is big-picture macroeconomics, which is concerned with how the overall economy works. Macro looks at the overall economy and looks at unemployment, inflation, GPD (output) growth or contraction in the short run and international trade and long-run expansion of an economy. If we study one approach and neglect the other, we are considered to be only half educated. The branch of microeconomics that deals with household behaviour is called consumer theory. It has applications in trade, industrial organization and market structure, labor economics, public finance, and welfare economics. Macroeconomics is more abstruse. Modify your profile, Updated: In macroeconomics, the subject is typically a nation—how all markets interact to generate big phenomena that economists call aggregate variables. (ii) Macro Economics. • J.M. -In Classical economics Wages are determined by VALUE OF LABOR, i.e. Macroeconomics deals with the study of individual behaviour. Microeconomics and macroeconomics both focus on the allocation of scarce resources. Unit-III Theories of Wages, Interest and Employment. Ans. The severe and prolonged global collapse in economic activity that occurred during the Great Depression changed that. Law of Returns to Scale; You may also like: … Contemporary microeconomic theory evolved steadily without fanfare from the earliest theories of how prices are determined. Their difference is primarily a matter of scale: Micro‐economics studies the micro‐scale of economic phenomena, while macro‐economics studies the macro‐scale. Macro-economics– The term ‘macro’ means large. Typically, it applies to markets where goods or services are bought and sold. History of Macroeconomics . But these divisions have been narrowing over the past few decades (Blanchard, Dell’Ariccia, and Mauro, 2010). It should be clear by now that economics covers a lot of ground. Keynes, The General Theory of Employment, Interest, and Money (1936). Micro examines the economy in miniature, while macro concerns itself with economic aggregates, such as gross domestic product or national unemployment rates. Pre Keynesian Macroeconomics literature -Suggested the possibility of crisis of effective demand. Health Details: We are using two broad categories: Microeconomics and Macroeconomics Microeconomics is the part of economics concerned with single factors and thee effects of individual decisions. Micro -- the prefix refers to very small things. The same cannot be said of macroeconomics—where there are, and have been, competing schools of thought about how to explain the behavior of economic aggregates. Macro Economics and its Importance: Definition of Macro Economics: Economics is traditionally divided into two main branches: (i) Micro Economics. Micro‐ and macro‐economics are two of the main branches of economic science, together with economic history, experimental economics, and econometrics. These two terms microeconomics and macroeconomics were first coined and used by Ranger Frisco in 1933. Economics is split between analysis of how the overall economy works and how single markets function, A question of scale (photo: Zack Seckler/Corbis). And you get it from the words. Microeconomics and macroeconomics are two different perspectives on the economy. Microeconomics is based on models of consumers or firms (which economists call agents) that make decisions about what to buy, sell, or produce—with the assumption that those decisions result in perfect market clearing (demand equals supply) and other ideal conditions. Micro and Macro Analysis: In recent years, the subject matter of economics is divided into two broad areas. Smith and other early economic thinkers such as David Hume gave birth to the field at the onset of the Industrial Revolution. They therefore re-examine the history of the relationship of microeconomics and macroeconomics, starting from their emergence as self-consciously distinct fields within economics in the early 1930s. Economics of the Crisis - Micro & Macro Headlines Video 3 In this part of our Head Start course on the global economic crisis, we look a little more closely at macroeconomics and in particular how the balance of Global GDP is changing between advanced and emerging countries. Words: 534. The Difference Between Micro- and Macro-economics. Whereas early economics concentrated on equilibrium in individual markets, Keynes introduced the simultaneous consideration of equilibrium in three interrelated sets of markets—for goods, labor, and finance. It takes into consideration the performance, behavior and structure of the economy as a whole rather than the individual components or firms (Microeconomics). Macroeconomics is a branch of economics that deals with the economy as a whole. Indifference Curve Contents: History Presenters Definition Sonia Shekdar Properties/Characteristics Nabeel Haider Indifference Curve MAP Fahad Hafeez Umair Laiq LOGO 2. Since Keynes, economic theory has been of two kinds: macroeconomics (study of the determinants of national income) and traditional microeconomics, which approaches the economy as if it were made up only of business firms and households (ignoring governments, banks, charities, trade unions, and all other economic institutions) interacting in two kinds of markets—product markets and those for productive … Microeconomic perspective focuses on individual markets, while macro concerns itself with economic aggregates, such as domestic... 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