![]() ![]() Similarly, the study of other factor incomes such as rent, interests, and profits is the subject matter of microeconomics but without the study of national income, the study of these factor incomes is impossible. But the firm cannot determine the wage rate independently it has to study the wages given by other firms of the economy. Microeconomics also analyzes how a particular firm determines the wages of labor. Similarly, the price of the product and the quantity sold also depend upon the national income, total employment, effective demand, etc. The price determination of that particular commodity also depends upon the commodities produced by other firms, quantities of commodities, nature of the commodities, cost of production, etc. We know that the price of a commodity is determined by the demand and the supply forces of the commodity. Macroeconomics plays an important role in the study of these aspects of microeconomics. For example, a particular commodity produced by a firm, the price of that commodity, individual consumption, wages of labor, etc. All microeconomic variables are a fraction of macroeconomic variables. Microeconomics analyzes the problems and behavior of small units of the economy. Dependence of Microeconomics on Macroeconomics It should explain prices, outputs, incomes, the behavior of individual firms and industries, and the aggregates of the individual variables. A general theory of the economy should cover both. Again, they are dependent on each other because the parts affect the whole and the whole affects the parts. The objective of the study of economics cannot be fulfilled by the study of only one, microeconomics or macroeconomics. of microeconomics are different from those of macroeconomics.īut macro and microeconomics are interdependent. The objectives, subject matters, assumptions, etc. Microeconomics studies the individual units of the whole economy whereas Macroeconomics deals with the aggregates and sub-aggregates related to the whole economy. Microeconomics and Macroeconomics are different in their approaches. Interdependence between Microeconomics and Macroeconomics This method of study is called ‘general equilibrium analysis.’ The total effect of an economic factor on the economy is taken into account in macroeconomic analysis. ![]() In macroeconomics, economic variables are categorized into aggregate units like aggregate demand, aggregate supply, total consumption, price level, total saving, etc. Based on the assumption of the distribution of the factors, it explains how full employment can be achieved. Macroeconomics assumes how the factors of production are distributed. This method of study is also known as the ‘partial equilibrium analysis. In other words, micro laws such as the law of demand and the law of supply become valid on the assumption i.e. With the help of these assumptions, micro laws establish relationships between the causes and effects of economic variables. Laws of microeconomics are formulated on assumptions such as full employment, constant production, and income, ceteris paribus (other things being equal). ![]()
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