Page 15 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes In respect of this, microeconomics helps to get practical knowledge of economics where there are less
economical problems and their solutions.
Microeconomics and macroeconomics, both are the study of aggregate. But the aggregates are different
from each economics. Microeconomics deals with the aggregation of individual family, individual firm
and individual companies. For example, the term ‘company’ adds many firms and things. The demand
for shoes can add various families and the supply is also added on various firms. The demand and
supply of labour in a region is the recognition of a group.” But the study of aggregates is different
from micro to macroeconomics. In macroeconomics, the groups used as “addition of whole economy”
but in microeconomics, it is not conjugates with an economy but relates to individual firm, family and
industry.

Give your opinion on micro and macroeconomics.

1.4 Problems of Interrelation and Integration of the Two Approaches
The differences of micro and macroeconomics are not rigid because their parts effects all the quantities.
Dependence of microeconomics on macroeconomics: For example, put the dependencies of
macroeconomics on microeconomics, when the demand increases in prosperity, then the demand of
individual things also increases. If this is due to the less interest rate, then product demand will also
increase. This will increase the demand of a specific labour for the pricing company. If the labour is
rigid then the cost of labour will increase. This happens due to increase in the cost of things. Hence
the macro economical changes changed the pricing of microeconomics. Thus the shape of income in
economical condition, employment production, pricing affects the individual company and firms. Thus
this affects the structure of price, production, employment of individual firm and industries in terms of
income, production, employment and cost in economics. Take another example, when the production
falls in crises, then the production of price falls rather than production of products. So the benefits,
employment and job fall mostly in product-industry rather than pricing-product industry.
Dependence of macroeconomics on microeconomics: On the other hand, macroeconomical theory also
depends on an individual. Whole is made with parts. The national income is an addition of people, firm
and company’s income general price range is an average of all prices of things and services. The general
price is the average of all prices of products and services. Thus the production is an average of whole
production of all the units in an economy.
We can put some examples on micro and macroeconomics. If economy concentrates their factors only
to the agricultural products then the production of an economy will cut because all other regions will
not cover. In an economy, the income and the employment status also depend upon the distribution
of income. If there is unequal distribution of income like some rich people get maximum income then
the consumer product will have less demand. This will affect profit and invest and production will
increase unemployment and at last, there is crisis situation in economy. Thus, the process of studying
and analyzing depends on both micro and macroeconomics.

Self Assessment
State whether the following statements are True/False:
9. Regner Frish was the first man who used the terms Macro and Micro in economics in 1933.
10. The study of small individual groups as well as individuals is macroeconomics.

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