Question
What is the difference between microeconomics and macroeconomics?
| Serial No. | Points of Difference | Microeconomics | Macroeconomics |
| 1. | Origin | The word micro comes from a Greek word 'Mikros' which means small. | The word macro comes from a Greek word 'Mackros' which means large. |
| 2. | Definition | It is a branch of economics that studies the economic relationships or issues at an individual level like the households, the firms, the consumers etc. | It is a branch of economics that studies the economic relationships or issues of an economy as a whole. |
| 3. | Objective | Its main objective is to analyse the principles, problems and policies for the achievement of the goal of optimum allocation of resources. | e the principles, problems and policies for the achievement of the goal of optimum allocation of resources. it investigates the principles, problems and policies relating to achievement of full employment and expansion of productive capacity. |
| 4. | Deals with | It deals with how consumers or the producers make decisions depending on their given budget and other variables. | It deals with how different economic sectors like households, industries and other government and foreign sectors make their decisions. |
| 5. | Method | The method of partial equilibrium (i.e. equilibrium in one market) is used. | The method of general equilibrium (i.e. equilibrium in all the markets, simultaneously) is used. |
| 6. | Assumptions | It assumes that while studying micro economics, macro variables remains constant. | Study of macro economics assumes that micro variables remains constant. |
| 7. | Variables | The major variables involved are price, consumer's demand, wages, rent, profit, firm's revenue, cost, etc. | The major variables involved are aggregate demand, aggregate supply, inflation, unemployment, poverty, etc. |
| 8. | Significant role | In the context of micro economics 'market mechanism' plays an important role. | In the context of macro economics 'government' plays a significant role. |
| 9. | Theories | Various theories studied are: 1. Theory of Consumer's Behaviour and Demand. 2. Theory of Producer's Behaviour and Supply. 3. Theory of price Determination under different market conditions. | Various theories studied are: 1. Theory of National Income. 2. Theory of Money. 3. Theory of General Price level. 4. Theory of Employment. 5. Theory of International trade. |
| 10. | Popularized by | Alfred Marshal | Keynes |
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OR
What precautions should be taken while estimating national income by expenditure method? Explain.| Output (Units) | 8 | 9 | 10 | 11 | 12 |
| AR(₹) | 5 | 4 | 3 | 2 | 1 |
OR
Explain with the help of a diagram and using Saving = Investment approach the determination of equilibrium output and income level in an economy. What happens when the economy is not in equilibrium and saving exceeds investment?| Output Units | Marginal Cost ₹ | Average Variable Cost ₹ | Total Cost ₹ | Average Fixed Cost ₹ |
| 1 | 60 | .......... | 120 | .......... |
| 2 | .......... | .......... | 174 | .......... |
| 3 | .......... | 54 | .......... | .......... |
| 4 | 54 | .......... | .......... | 15 |
| 5 | .......... | 57 | 345 | .......... |
| (Rs. crore) | |
| 300 |
| 1000 |
| (-) 20 |
| 100 |
| 130 |
| 30 |
| 50 |
| 40 |
| 200 |
| 100 |
| 20 |
| 0 |
| S.No. | (Rs. crores) | |
| 1 | Current transfers by government. | 15 |
| 2 | Private final consumption expenditure. | 400 |
| 3 | Net current transfers from the rest of the world. | 20 |
| 4 | Government final consumption expenditure. | 100 |
| 5 | Net factor income from abroad. | - 10 |
| 6 | Net domestic capital formation. | 80 |
| 7 | Consumption of fixed capital. | 50 |
| 8 | Net exports. | 40 |
| 9 | Net indirect taxes. | 60 |