Tag: business economics and quantitative methods

Economics is divided into two parts:

'Ceteris paribus' means 'other things being equal'. This clause in the law of demand refers to other things except price being equal. Hence, it does not mean the price of the commodity does not change, under the law of demand.

Macro economics deals in the overall problems of the economy that involves the study of national aggregates. Problems of unemployment, illiteracy, etc are studied under macro economics since these include economy as a whole and not from the view point of an individual unit.

Macro economics deals with the study of economics as a whole and the study of collective or aggregate variables like national income and how they influence the whole economy. Theory of income and employment explains how aggregate demand and supply decide the level of income and employment in an economy as a whole. Thus, it is a part of macro economics.

Microeconomics deals with the study of economics from the viewpoint of an individual unit and the study of individual variables and their relation with each other that influences a market place and its factors. 

Scarcity of resources exist at both the macro and micro levels due to never ending human wants. In the situation of scarcity of resources, at macro level, the economy is able to maximize the welfare along with the rapid pace of economic growth. While, at micro level, an individual maximizes his satisfaction as consumers and maximizes his profit as producers.

All economic problems arises due to unlimited human wants and limited resources. Moreover, these resources have alternative uses and wants keep on increasing each day. This economic problem is also known as problem of choice or the problem of allocating resources to alternative uses.

Microeconomics is defined as "The study of the economic choices individuals and firms make and of how these choices create markets." Thus the study of microeconomics looks at specific markets individually and in great detail. Thus it will tend to examine micro variables such as the demand specific to a particular market or good. It will not be concerned with the aggregate market demand, or any other aggregate variables that treat the economy as one unit. 

Microeconomics deals with the aggregates of economic issues relating to small economic units. For example, market demand is the aggregation of individual demand.

The subject matter of macroeconomics includes determination of the level of employment, national  income and price level in the economy.

Macroeconomics is a general equilibrium analysis which studies an economic phenomenon by taking all the aggregate units in the economy into consideration.