What is the difference between macroeconomics and microeconomics?

Definitions 📖

• Microeconomics deals with the impacts of individual economic decisions 

• Macroeconomics deals with the impacts of aggregate (total) economic decisions. 

• Specifically, microeconomics deals with individual firms, households, products, prices, wages, etc, while Macroeconomics deals with national income, GDP, price level, etc. 

• Macro is the big picture: GDP, inflation, unemployment
  • Take a look at this blog to learn more about GDP and how to calculate it

• Micro is the zoomed in: individuals, markets, firms and structures
• Interested in learning about Micro? sStart with this explanation on Supply and Demand

Examples

• For example, when determining the right wage to pay workers in your factory you use the microeconomic factors of marginal revenue product and demand.

• Similarly, when determining the GDP of a country you use the macroeconomic factors of consumer expenditure, government expenditure, net investment, and net exports. 

Caveat

• Some economic principles are present in both the study of Macroeconomics and Microeconomics

• These are known as the basic economic principles and include the principles of scarcity, opportunity cost, comparative and absolute advantage, the production possibilities curve, etc.

• Macroeconomics and microeconomics work TOGETHER - they are not two completely separate fields

Conclusion

• Macroeconomics and Microeconomics have different focuses, but one must learn both to understand the economy as a whole.