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Micro economics and Macro economics

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Micro economics and Macro economics

Concept of Micro and Macro Economics:

a)Micro Economics:- The word 'Micro' is derived from a Greek word 'Mikros' which means tiny or small. Hence, micro economics studies small unit of economic analysis, such as particular consumer, individual firm, market, industry etc.

According to K.E Boulding, "Micro economics is the study of particular firms, particular households, individual prices, wages, income, individual industries, particular commodities."

In the words of A.P Larner, " Micro economics consists of looking economy through a microscope."

Importance of Micro economics:

Its importance are as follows:

1. To formulate economic policies and laws and various principles.
2. Act as an important part to make a picture production process and distribution process.
3. Facilities the study of marketing and optimal allocation of resources
4. It helps government impose tax on Commodities and fix the wage rates.
5. To evaluate the balance of payment, exchange rates and economic policies to the state.
6. To know about individual economic problem, taste and habits of individual consumer towards a particular goods, etc.
7. To understand macroeconomics.

Scope of micro economics:

  • Allocation of resources
  • Theory of product pricing
  • Theory pf factor pricing
  • Theory of economic welfare

b) Macro Economics:- The word 'Macro' is derived from a Greek word 'Makros' which means broad or large. Macro economics is related with aggregate economic activities and studies the entire economic activities collectively. It collectively studies national income, employment, national output, price level, total saving, total investment etc.

According to K.E Boulding, "macro economics deals not with individual quantities as such but with aggregate of those quantities, not with individual income but with the national income, not with individual output but with the national output."

According to R.G.D Allen, " The term 'Macro economics' applies to the study of relation between broad economic aggregates."

Importance of Macro economics:

Its importance is as follows:

1. To formulate policies, strategies for the economic development of a country.
2. To solve aggregate economic problems like inflation, poverty, unemployment, etc.
3. To solve monetary and trade cycle problems and explore scientific methods.
4. To analyze the relationship between different economic problems. 
5. To understand microeconomics.

Scope of macro economics:

  • Theory of income and employment
  • Theory of general price level and inflation
  • Theory of economic growth
  • Modern/ Macro theory of distribution

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