Interdependence
between micro and macro economics
Micro and
macro-economics are different in their approaches:
- Micro studies the individual units of the whole economy whereas, Macro deals with the aggregates and sub-aggregates related to the whole economy
- The objective, subjective matter, assumptions etc, of micro economics are different from those macro-economics. But micro and macro are independent.
- The objective of the study of economic can’t be fulfilled by the study of only one, micro and macro.
- They are independent on each other because the parts affect the whole and the whole effects the parts.
- A general economy covers the both micros and macros.
- It should explain prices, output, incomes, behavior of individual firm and industry and the aggregates of the individual variables.
- Micro studies the individual units of the whole economy whereas, Macro deals with the aggregates and sub-aggregates related to the whole economy
- The objective, subjective matter, assumptions etc, of micro economics are different from those macro-economics. But micro and macro are independent.
- The objective of the study of economic can’t be fulfilled by the study of only one, micro and macro.
- They are independent on each other because the parts affect the whole and the whole effects the parts.
- A general economy covers the both micros and macros.
- It should explain prices, output, incomes, behavior of individual firm and industry and the aggregates of the individual variables.
Dependence of micro
on macro economics
-
Micro economics analyzes
problem and behavior of small units of the economy. All micro economic
variables are fraction of macro-economic variables.
-
Micro economics also analyzes
how a particular firm determines the wages of labour. But the firm cannot
determine the wage rate independently; it has to study the wages given by other
firms of the economy.
-
Example: - A particular
commodity produced by firm
Price, consumption, wage,
labour etc are analyzed under micro economics. Microeconomics plays an
important role in the study of these aspects of microeconomics.
o
We know that price of commodity
is determined by market demand and market supply.
o
The price determination of that
goods also depend as goods produced by other firm. Quantity and nature, (cost
of production) of commodities etc.
o
Similarly the price of product
and the quantity sold also depend upon the national income, total employment, and
aggregate effective demand.
Dependence on macro
on micro economics
-
Macro-economic studies the
economy as a whole.
-
For eg; general price level,
National Income, employment etc from the subject matter of macro-economics. But
the total is made up of parts.
-
The NI is the sum of total
income of individual households, firms and industries.
-
Thus, it can’t be studied
without the perfect information of the factor incomes such as rent, wages, interest
and profits.
-
The general price level is the
averages of all prices of individual goods and services.
Thus, the
aggregate and averages that are studied in macroeconomics are nothing but
aggregates and averages of individual quantities which are studied in micro
economics.