Five Differences Between Macroeconomics and Microeconomics.
Lesson 5: Handout 1
Economics, as a whole, is the study that focuses on production, distribution and consumption of all goods and
services within an economy. Microeconomics and macroeconomics are two categories within this subject that
each focus on different aspects of the economy.
Approach
These two categories of economics each take a different approach when studying the effects and patterns of the
economy. Microeconomics takes a bottoms-up approach. With this approach, aspects of the economy from the
bottom up, the consumers are studied first. This information is analyzed by working up towards the whole
economy. Macroeconomics takes a top-down approach, starting with the top of the economy: the government. It
works its way down to the consumer, trying to relate effects and patterns of the economy, in order to develop
theories.
Decisions
Microeconomics is a type of study that focuses on individuals and business decisions; whereas macroeconomics
studies the economy as a whole by focusing on country and government decisions. Macroeconomics views the
big picture of the economy; while microeconomics looks at smaller segments and tries to determine theories to
explain them.
Goods and Services
The study of microeconomics uses theories to explain why consumers purchase and allocate resources for
certain goods and services. This study focuses on supply and demand and the effects of prices. Economists
studying macroeconomics tend to focus on the industries as a whole and the entire economy. This type of
economics doesn't look at supply and demand, but instead focuses on larger issues that control consumer
spending such as unemployment, national income and rate of growth.
Issues Studied
Microeconomics is the study of individual choices, how these choices are decided, what motivates consumers
and the effects they have on the economy. Under this type, economists study the theory of supply and demand
and the factors of production. [Macroeconomics] calculates and studies gross domestic product (GDP) and the
national debt.
Lesson 5: Handout 1
Example
For example, a micro economist may study the types of cars consumers are purchasing. He will try to determine
the motivating factors, which might include gas prices and unemployment rates. If gas prices are high,
consumers might be avoiding buying SUVs. [If] unemployment rates are low, car sales might be up. The macro
economist will study the car industry as a whole. He will do an analysis to determine why production is up or
down. He will study inflation rates and average income rates to determine the effects these things have on the
production of vehicles.
Article by Jennifer Van Baren
Online Source http://www.ehow.com/info_8242712_five-differences-between-macroeconomicsmicroeconomics.html
Lesson 5: Handout 1