Micro and macro approach to economic analysis?


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Rosie Normanton answered
The two main approaches to economic analysis are microeconomics and macroeconomics, commonly shortened to micro and macro. Microeconomics looks at economics in terms of events that occur on a small scale. For instance, it will consider the costs and revenues of individual businesses, and issues such as company privatization and demand and supply analysis Independent events in the economy are studied in microeconomics. In macroeconomics, a more broad approach is taken. The area looks at the overall state of an economy and considers various elements as a whole. Subjects such as market structures, globalization and currencies are studied in macroeconomics.
  • How micro and macro economics fit together
Whilst micro and macro economics are separate study areas, they do link together. The effects of decisions and actions taken on a micro level 'add up' to produce macro effects, which will in turn lead to other changes in the economy overall. For instance, on a micro scale the demand for oil by consumers may rise, due to increases in local bus fares. This rise in demand causes the price of oil to rise, and eventually this could cause macro effects such as inflation, for instance. This inflation reduces the value of money and could lead to an increase in voluntary employment as real wages fall. This effect can be seen on a micro level as individuals leave their jobs and seek work elsewhere (or claim benefit payments). Usually, if something that occurs on a micro level becomes widespread, it will evolve into a macro issue.

  • The study of economics
Economics investigates what an economy is, and fundamentally how the resources in an economic are allocated. It looks at how workers and companies fit together to provide people with the products and services they need and want.

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