What is the difference between microeconomics and macroeconomics?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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As their names suggest, the essential difference between these two types of economics is that one covers a larger scale than the other.  Microeconomics is on a small scale.  Macroeconomics is on a large scale.

To be precise, macroeconomics concerns itself with the economy of a whole region or a whole country.  By contrast, microeconomics deals in much smaller topics.  Microeconomics can cover something as small-scale as the decisions that individual consumers make.  It can also cover larger things like the economic decisions of individual firms.  It can even cover things as large as the economics of an entire industry. 

In order to understand the difference between these two, let us look at an example.  If we ask what will happen to the price of oil in the near future, that is microeconomics because it is concerned only with one industry.  However, if we ask something like “if the price of oil goes up, how will the US economy be affected,” we are dealing with macroeconomics.  This is because what we are really interested in is how the economy as a whole performs, not with the oil industry.

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