Deepa ;)

Economics is a study of economic problems.

Wants are motive force for economic activity.
Wants leads to efforts. Efforts secures
satisfaction.

Wants Efforts

satisfaction
1. Consumption: Extracting utility from goods
and services.
2. Production: Production of goods and
services which posses utility.
3. Exchange: means buying and selling of
goods and services. It is link between
consumer and producer.
4. Distribution: Sharing of income by the four
factors of production.
Father of Economics Adam Smith in his book Wealth
of Nations 1776 defined economics is the study
of wealth.
Alfred Marshall in his book Principles of Economic
Science-1890 defined Economics is the study of
man kind in the ordinary business of life.
Economic is the science which studies human
behavior as a relationship between ends and
scarce means which have alternative uses.
Micro economics is the study of particular firms,
households, individual prices and particular
commodity.Micro economics is based on the
assumption of full employment and ceteris
paribus (other things remain constant).
Micro economics was popularized by David
Ricardo, Marshall, J.B Say and J.S Mill.
Micro economics called as Price Theory.
Macro economics is the study of economic
system as a whole. Macro economics studies
aggregates values like National Income,
National output, general price level, total
consumption, saving and investment of a
country. Macro economics is called Income
and Employment theory. J.M Keynes
popularized macro Economics
Where micro economics explain a tree in the
forest, macro economics explains all the
trees in the forest.
In micro economics, the behaviour of individual consumers and
producers in detail is analysed. It is study of subject matter
from particular to general.

Micro economics divides the economy into various small units

and every unit is analysed in detail. It is a slicing method.

Micro economic analysis involves product pricing, factor pricing

and theory of welfare.

Both theoretically and practically, micro economics is useful in

formulating various policies, resource allocation, public finance,
international trade, etc
Micro economics studies behavior of individual
consumer or producer in a particular situation.

Micro economics decides prices of various goods and

services on the basis of 'Demand-Supply Analysis'.

Micro economics helps in formulating various

economic policies and economic plans to promote all
round economic development.

It helps the government in fixing the tax rate and the

type of tax as well as the amount of tax to be
charged to the buyer and the seller.
Micro economics is based on the information dealing with
individual behaviour, individual customers. Hence, it is difficult
to get correct information. So because of incorrect data Micro
Economics may provide inaccurate results.

It assumes that all other things being equal (same) but actually
it is not so.

Micro economics is based on unrealistic assumptions, especially

in case of full employment assumption which does not exist
practically.
Macroeconomics is the study of 'large aggregates'. It
actually studies the economy as a whole.

The major task of macroeconomics is determining

the national income of a country.

It is useful for certain government policies of how,

why and when it should be implemented.

It is based on the theory of general equilibrium, ie. it

considers each and every aspectof the economy
other than microeconomic's theory of partial
equilibrium.
It helps to bring stability in price level and analyses
fluctuations in business activities.

It suggests policy measures to control Inflation and

deflation.

It helps to solve economic problems like poverty,

unemployment, business cycles, etc., whose solution
is possible at macro level only, i.e., at the level of
whole economy.

It helps to achieve the goal of economic growth,

higher level of GDP and higher level of employment.
The macro economies ignores the welfare of the
individual.

The macro economics analysis regards aggregates as

homogeneous but does not look into its internal
composition.

The macro economic models are designed mostly to

suit the developed countries of the world. The
developing countries face different economic
realities, so they do not benefit much from them.
The micro and macro economics are interdependent.
We cannot draw any precise line of separation
between micro and macro economics. We cannot put
them in water light compartments. Both these
approaches help us in analyzing the working of the
economy. If we study one approach and neglect the
other, we are considered to be only half educated.
We should integrate the two approaches for the
successful analysis of the working of economic
system.