The study of economics is divided into microeconomics and macroeconomics by the modern economists. Both of them discuss the economical activities but are used in different sectors under different circumstances.
The word “Micro” has come from a Greek word “Mikros” which means millions of parts. Microeconomics discuss about individual parts of the whole economy. Microeconomics is also called price theory.
Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize its production and capacity so it could lower prices and better compete in its industry.
According to the famous economists Henderson and —“Microeconomics is the study of the economic actions of individuals and well defined groups of individuals.”
In the words of Boulding ― “Microeconomics is the study of particular firms, particular households, individual prices, wages, incomes, individual industries, particular commodities.”
The word “Macro” comes from a Greek word “Makros” which means large. Macroeconomics is concerned with aggregates and averages of the entire economy, such as national income, savings and investments, aggregate demand and supply etc.
In K.E Bouldings words, “Macroeconomics deals not with individual quantities but with aggregates 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.”
Macroeconomics is the income theory that explains the level of total production and why the level rises and falls. Macroeconomics is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena, such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation’s capital account or how GDP would be affected by unemployment rate.