Economics · Ch 1 — Economics: An Introduction
Microeconomics and Macroeconomics
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Microeconomics and Macroeconomics
Modern economics is conventionally split into two broad branches, based on the scale at which economic behaviour is examined. The Norwegian economist Ragnar Frisch introduced the terms 'microeconomics' and 'macroeconomics' in 1933, and this remains the most basic organising division of the whole subject.
| Basis | Microeconomics | Macroeconomics |
|---|---|---|
| Meaning | Studies individual economic units — a single consumer, a single firm, a single industry | Studies the economy as a whole — aggregates and averages |
| Also called | Price theory | Income theory |
| Typical questions | Why did the price of tomatoes rise this week? How does a firm decide how much to produce? | Why is India's overall price level rising? What determines the nation's total output? |
| Key variables | Individual demand, individual supply, price of a single good, a single firm's cost and revenue | National income, aggregate demand, aggregate supply, general price level, total employment |
| Approach | Builds up from the smallest unit (a household, a firm) | Looks down at the economy from the top, using aggregates |
Definition 1Microeconomics
The branch of economics that studies the economic behaviour of individual units — a single consumer, a single household, a single firm, or a single industry — and how prices are d …
Definition 2Macroeconomics
The branch of economics that studies the economy as a whole, using aggregates such as national income, the general price level, total employment, and the over …