The main difference is that micro looks at small segments and macro looks at the whole economy. Micro economics tends to work from theory first – though this is not always the case.ĭifferences between microeconomics and macroeconomics Macro economics places greater emphasis on empirical data and trying to explain it.Keynesian, Monetarist, Austrian, Real Business cycle e.t.c). There are different schools of macro economics offering different explanations (e.g. ![]() There is little debate about the basic principles of micro-economics.In macro economics, the economy may be in a state of disequilibrium (boom or recession) for a longer period. Microeconomics works on the principle that markets soon create equilibrium.Small segment of economy vs whole aggregate economy.The main differences between micro and macro economics Macro diagrams are based on the same principles as micro diagrams we just look at Real GDP rather than quantity and Inflation rather than Price Level (PL).Instead of just looking at individual demand for cars, we are looking at aggregate demand (AD) – total demand in the economy.Inflation measures the annual % change in the aggregate price level. Instead of the price of a good, we are looking at the overall price level (PL) for the economy.The macro diagram is looking at real GDP (which is the total amount of output produced in the economy) instead of quantity.This looks at all goods and services produced in the economy. This micro economic analysis shows that the increased demand leads to higher price and higher quantity. Microeconomics is concerned with issues such as the impact of an increase in demand for cars. If we look at a simple supply and demand diagram for motor cars. ![]()
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