Scope of Microeconomics and Macroeconomics

The 'scope' of a subject means the various branches or areas of study it covers. Because Microeconomics and Macroeconomics study the economy at two very different levels, their scope covers quite different — though related — ground.

Scope of Microeconomics is generally organised under three broad heads:

1. Theory of Product Pricing — the theory of demand (how consumers decide what and how much to buy) and the theory of supply (how firms decide what and how much to produce), together determining the EQUILIBRIUM PRICE of an individual commodity in its own market. This branch also studies consumer behaviour and the different market forms — perfect competition, monopoly, monopolistic competition and oligopoly — under which a firm may sell its product.
2. Theory of Factor Pricing (Distribution) — how the price of each factor of production is determined: RENT for land, WAGES for labour, INTEREST for capital, and PROFIT for the entrepreneur. Together, these factor prices determine how the value of total output is distributed among the different factors that helped produce it.
3. Theory of Economic Welfare — how efficiently a society's scarce resources are allocated among competing uses, and whether that allocation maximises the well-being (welfare) of society as a whole.

Scope of Macroeconomics is generally organised under the following broad heads — several of which this Std XII Economics book studies as full chapters of their own later on:

1. Theory of National Income — the definition, measurement and circular flow of a country's national income (studied in the National Income chapter later in this book).
2. Theory of Employment — the determination of the general (aggregate) level of employment and the causes of involuntary unemployment in the economy.
3. Theory of the General Price Level — the causes and effects of inflation (a sustained rise in the general price level) and deflation (a sustained fall), studied through Index Numbers, a later chapter of this book.
4. Theory of Money and Banking — the functions of money, and the working of the money market and capital market (studied in the Money Market and Capital Market chapter later in this book). …