Inter-dependence between micro and macro economics


Inter-dependence between micro and macro economics:

Micro and macro economics are the two branches of the same tree. They are not rivals, rather complementary to each other. A study of only one is incomplete study of economics. The dependency between these two is elaborated as follows:

a) Dependence of Macro economics on micro economics:
Various practical principles of macro economics have been formulated with the analysis of micro economics. The former studies matters like total consumption, saving, investment. Various policies and laws of the macro economics have to be applied in an individual manner, i.e through micro economics. So, Macro is dependent on Micro economics.

b) Dependence of micro economics on macro economics:
Profit making by an individual firm depends on overall demand, national income and price level. Various individual activities are determined by collective activities. eg; Interest is the price of capital. Here, price of capital is micro variable but interest rate is determined by macro economics. In this way, micro economics is dependent on macro economics.

In this way,both analyse economic activities. A hard and fast line can't be drawn between micro and macro economics. Despite some distinctions between them, they are interrelated. Both analyses are important for general principal of economy.

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