Macroeconomics and Microeconomics are both topics relating to the economy. Although their studies and research finds results for different aspects of this large general topic, economics, macroeconomics and microeconomics are interdependent of one another. Macroeconomics is a global or “big picture” view of the economy, whereas microeconomics studies specific decisions of those within the economy. Macroeconomics looks at large ideas such as broad trends of a national economy. On the other hand, microeconomics hones in on the individual household or business’s spending trends to determine spending habits and other economic data, which is used to determine supply and demand of the overall market. These two types of economics do appear to be different, but in many instances they overlap each other. Often, the macroeconomics of a population determines the microeconomics of the population as well. Neither of these two topics can exist alone, one topic sets the determining factors for the other topic when it comes to financial analysis of a population.
In the topic of economics, macroeconomics is the field of study which is concerned how the overall economy works. It studies large economic ideas such as employment, gross domestic product and inflation (Rodrigo, 2010). These are the kind of ideas that would warrant time on the evening news or an article in a nation newspaper. The government is a major topic of analysis in macroeconomics. In macroeconomics, the economy that is usually being researched is of the national variety. Snowdon and Stonehouse (2006) explain that the government has a big role in macroeconomics. They must establish stability within its country in the political, social and legal sense (p. 168). Without these necessary variables, an economy cannot be prosperous. Macroeconomics analyzes all these factors and from that data, a national economic picture can be deduced and compared with other global economies.
Most experts think that macroeconomics is important for the big picture, but microeconomics truly helps businesses and individual organizations to access their specific situation. This branch of economics is usually divided into areas such as consumer demand theory and production theory (Rodrigo, 2010). Microeconomics looks at the decisions of the individual within a consumer population. This field of economics looks at the individual’s limited resources and how they spend them .This data helps to determine supply and demand within the market (Epley, 2012). If companies know information generated from the supply and demand model that microeconomics can devise, they are then able to determine the price to sell products that will be the most profitable within the market. Microeconomics is very important in consumer-producer relationship. Without it, suppliers would not know how much to supply because they would be unable to determine how much of the products consumers are willing to buy, and at what price.
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"The Interdependency of Microeconomics and Macroeconomics".
By examining the way that economics works, it is apparent that the two fields of economics, macro and micro economics interact very often. As Epley explains the relationship between the two ideas, he says, “the decisions of individuals make up the economics studied in macroeconomics, even as broader trends in those economies strongly influence the decisions of the individuals” (2012). This shows that one is interdependent of the other. For instance, a micro economist cannot study policies within particular businesses without understanding the implications of economic growth and taxation, which are macroeconomic principles. Adversely, a macroeconomist cannot analize components of a country’s nation economy without understanding the impact of the individual household on that economy, which is a microeconomics principle. Another example that these two ideas are related is the topic of unemployment. Unemployment is a macroeconomics principle but also affects the microeconomics. For instance, a company who cannot find good workers may have additional production costs and in turn will cause the cost of goods to rise and affect the individual. This shows how one principle can affect both aspects of the economy.
Macroeconomics and microeconomics are two ideas that cannot be separated. One is definitely interdependent of the other. Although many economists call themselves either macroeconomists or micro economists, the truth is that they must have some expertise about both to be either one. For example, a macro economist cannot determine next year’s national buying or spending trends without first examining the individual’s spending habits within the population. Likewise, a micro economist cannot accurately make predictions of individual spending habits without giving proper consideration to the political or financial situation of the nation as a whole. These two sections of economics must work together to gain a better understanding of individual markets, which in turn will increase the effectiveness of the global or macro economy (Snowden and Stonehouse, 2006, p. 164). Basically the two ideas are just different approaches to come up with the same results. Macroeconomics just starts its research from the top of the economic chain and works its way down, whereas microeconomics starts at the bottom and works its way up in determining economic information for the community.
- Epley, J. (2012, October 10). What is the Difference Between Micro and Macro Economics? Retrieved from Inflationdata.com: http://inflationdata.com
- Rodrigo, G. C. (2010). MIcro and Macro: The Economic Divide. Retrieved from imf.org: www.imf.org/
- Snowdon, Brian, and Stonehouse, George (2006). Journal of International Business Studies, 37, 163-175.
