Question

Distinguish between the following:

Microeconomics and Macroeconomics

Give three points of difference between microeconomics and macroeconomics.

Answer 1

	Basis of Difference	Microeconomics	Macroeconomics
1.	Definition:	It is a branch of economics that studies economic variables at an individual level, like a household, firm, and consumer.	It is a branch of economics that studies economic variables of an economy as a whole.
2.	Deals with:	It deals with how consumers or producers make decisions depending on the budget given to them and other variables.	It deals with how different economic sectors (household, industrial, government, and foreign) make their decisions.
3.	Approach  used:	It is based on a partial equilibrium approach (i.e., equilibrium in one market)	It is based on general equilibrium approach (i.e., equilibrium in all markets simultaneously)
4.	Variables involved:	The major variables involved are price, consumer demand, wages, rent, profit, and the firm’s revenue and cost.	The major variables involved are aggregate demand, aggregate supply, inflation, unemployment, and poverty.