Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms.
Microeconomics focuses on issues that affect individuals and companies. This could mean studying the supply and demand for a specific product, the production that an individual or business is capable of, or the effects of regulations on a business.
Microeconomics is also useful for studying the effects of personal decisions. One of the most common principles in microeconomics is opportunity cost.
Opportunity cost is the value of making one decision over another. A decision that involves economy cost is the choice of one meal instead of another: by choosing a certain food, you miss out on the benefits offered by another.
Macro economics is the study of the whole economy. It looks at ‘aggregate’ variables, such as aggregate demand, national output and inflation.
Macro economics is concerned with
- Monetary / fiscal policy. e.g. what effect does interest rates have on the whole economy?
- Reasons for inflation and unemployment.
- Economic growth
- International trade and globalisation
- Reasons for differences in living standards and economic growth between countries.
- Government borrowing