Microeconomics and Macroeconomics

The terms "microeconomics" and "macroeconomics" come from the Greek words mikros (small) and makros (large), and were introduced into economic vocabulary by the Norwegian economist Ragnar Frisch in 1933. They describe the two broad levels at which economic behaviour can be studied.

Microeconomics studies the economic behaviour of individual units — a single consumer, a single household, a single firm, or a single industry — and how prices of individual goods and factors are determined. Because price determination is at its core, microeconomics is also called Price Theory. It covers topics such as the theory of demand, theory of supply, consumer behaviour, theory of production and costs, and the different market forms (perfect competition, monopoly, and so on) — most of which are studied in later chapters of this course.

Macroeconomics studies the economy as a whole, in terms of aggregates — total (national) income, the general price level, aggregate demand and aggregate supply, total employment, and the overall rate of economic growth. Because its central concern is the level and growth of aggregate income, macroeconomics is also called Income Theory or Aggregate Economics. It developed rapidly after the Great Depression of the 1930s, especially following the publication of John Maynard Keynes' The General Theory of Employment, Interest and Money in 1936.