Gujarat BoardEnglish MediumSTD 11 CommerceEconomicsEconomics : An Introduction5 Marks
Question
Explain the concept of Micro and Macro Economics.
✓
Answer
Introduction :
In present time to understand the scope of economics, there are two way:
Micro Economics and
Macro Economics.
These two words originally derived from Greek word.
‘Micro means small and Macro means Aggregative.
The subject which studies individual or small unit of economy is Micro Economics and subject which studies aggregate or over all sector of the economy is Macro Economics.
Micro Economics :
Micro Economic studies and analysis the individual units of an economy.
E.g. in the study of demand, consumer is an individual unit of analysis of economics.
Similarly in the study of supply in economics, firm is an individual unit of analysis.
Unit of consumption is a goods or service.
In labour market analysis, unit is labour.
In short, the analysis which studies the behaviour of unit and which counts the marginal is called micro economics.
Marginal utility of consumer behaviour given by Marshall or studies of indifference curve analysis given by Hicks is the example of micro economics.
Similarly Law of Demand, Law of Supply productivity of labour etc. are studies in micro economics.
According to Prof. Mourice Dobb, “In micro economics, the subtle things of economics are studies in which families, firms and industries and their inter relationship are analyzed.”
Micro economics helps in the decision making of economic agents like consumer, firm, labour etc.
It helps in the understanding of economic behaviour of this agents.
In short, micro economics deals with the determination of price of goods or production and the principles of values and factors of distribution.
Macro Economics:
Macro Economics rather than focusing on an individual unit, it deals with aggregate or all together.
E.g. study of national income, aggregate employment, aggregate production, population or census etc. are the examples of Macro Economics.
According to Prof. Boulding, “Macro-economics means the study of total quantity of money is the example of macro economics.
The study of macro economics helps the government in framing of economics policies and helps the economic institutes in decision making process.
The study of macro economics helps in the explanation of aggregate price determination, determination of value of money as national income.
Macro economics deals with the national problems like poverty, unemployment, population, inflation and analyzed it.
To understand the working of economy as a whole and to frame policies against economic problems, study of macro economics helps a lot.
Conclusion:
Micro economics and Macro economics are two branches which are development for the purpose of study and analysis.
Micro study helps in the framing of macro policies.
Similarly it can be study from impact of macro policy on an individual unit.
Both analysis are complementary to each other.
For example:
Micro economics explains the determination of price of a good, while Macro economics explains the determination of aggregate or average price level.
The summation of the value of individual goods leads to aggregate price level.
Similarly we may know the aggregate production through the summation of individual production.
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