Page 9 - DECO402_Macro Economics

Macroeconomic Theory

Notes of unemployment, the rate of inflation, the nation’s total output and other matters of economy
wide significance.”

A Necessary Caution

Generally it is said that macroeconomics is the study of aggregates not of “individual units “, which
is studies in only microeconomics. To understands this difference caution is needed. Regarding this
following two matters is needed to consider:
(i) Marcoeconomics is the study of aggregates and that is only at whole economy level. Therefore,
when we mention of demand in macroeconomics then our means to aggregate demand.
Whose vested means all goods and services for whole economy’s by all sector as (all families)
all friends and government demand)
(ii) There is no doubt in this that in microeconomics studies individual units, but it means not
that in this related individual unit aggregates does not study .

Notes In both micro and macro economics supply / demand are added. But in micro
economics it is limited to aggregate of any one goods or one market(as a market of
cricket balls), where as is macro economics is added of all those goods and services’
which is produced by an economy, whether it is cricket balls or hens or chicken.

When we talk about supply and demand of text books of economics then we means only market of
economics text books, rather than in it total demand and total supply are included, whether this total
demand of economics text books which students buys or, total economics text books which seller
sells.

Salient points on the Difference between Microeconomics and macro
economics

1. Degree of Aggregation: Microeconomics and macroeconomics ‘s economics factors’ degree of
aggregation gets difference. Microeconomics studies those economic problems which is related
to single economic unit as a single firm or small group of economic units as a single industry.
Macroeconomics studies economic problems of firms of an economy. In microeconomics
studies only a small part of economic factors where as in macroeconomics studies important
aggregates of economic variables.
2. Focus of Study: The focus of study of microeconomics theory related to optimum distribution
of factors and study of problems and policies. Just its contrary macroeconomics focus of study
employment status of resources tends in economy and resources development related theory,
study of problems and policies.
3. Basic Parameters of Subject matter Difference: In microeconomics and macroeconomics
explaining basic Parameter, Prof. G. Thimmah has said that the main determiner of
microeconomics problem is price whether the main determiner of macroeconomics problems is
income. In microeconomics consumer, producer, factor of production etc. economic units takes
their prices it different –markak basis. Just its contrary in macroeconomics total investment,
total savings etc. related decision are taken mainly income means rational income’s basis.

2 LOVELY PROFESSIONAL UNIVERSITY