Concept of Microeconomics and Macroeconomics:
Modern economists have divided the whole economic theories into two parts: microeconomics and macroeconomics. These words in economics were first used by Ragner Frisch in 1933 A.D.
Microeconomics:
The word ‘Micro’ has been derived from Greek word ‘Mikros’ which means small. Therefore, microeconomics deals with the analysis of small units like individual consumers, individual firms, individual producers etc. In simple words, microeconomics is that part of economics which deals with individual part of the economic system. It studies how an individual make their economic choices, how their choices determine. Thus, microeconomics is the study of decision-making behavior at micro level.
According to K.E. Boulding, “Microeconomics is the study of particular firms, particular households, individual prices, wages, incomes, individual industries, particular commodities.”
Microeconomic theory is also called price theory because it is concerned with determination of prices of commodity and factors of production.
Macroeconomics:
The word ‘Macro’ has been derived from Greek word ‘Makros’ which means large. Therefore, macroeconomics deals with the analysis of aggregate level or the economy as a whole. In simple words, it is the study of economy as a whole. It studies not individual economic units like a firm or an industry but the whole economic system. It deals with total or aggregate like national income, aggregate output, employment level, general price level etc. Thus, it is also known as aggregate economics.
According to K.E. Boulding, “Macroeconomics deals not with individual quantities but with the aggregate of these quantities, not with individual incomes, but with national income, not with individual price but with price level, not with individual output but with national output.”
Macroeconomic theory is also called income and employment theory because it is concerned with determination of national income and employment. It is also called Keynesian economics because macroeconomics is first started with publication of J.M. Keynes’ book ‘The general theory of employment, interest and money’ in 1936 A.D.
Difference between Microeconomics and Macroeconomics:
