What is Economics in a popular term? Is it science or arts? Is it a study of a completely different thing or just a study of something that we know and use daily? Well for that we need to know the definition of Economics.
- It is a study of the science of daily life. It encompasses everything that is done commonly in daily life. It is the study of rational behaviour. It is a study of human nature. Everyday demand and supply are studied in Economics.
Why is it important as a subject?
- It is extremely an important subject because what a rational human being does is reflected or studied in this subject. For many, it is a study which involves no mathematics. It is purely hypothetical and runs on assumption. Whereas for the others, it is a study which involves derivations and the measure of something very crucial to life. It is as essential as the study of Physics and Chemistry.
- Yes, for a detailed study in Economics, Statistics is required and you cannot do away with it. In such cases, Economics is referred to as the study of science. In greater terms, Economics is actually a study of the uses of Statistics and Mathematics.
- It is a study of all the terms related to measuring the degree of similarity or dissimilarity present in the human mind. Though it is hypothetical in knowing the actual scenario and it is assumed more to draw a conclusion, yet it is extremely important to have an in-depth knowledge of Economics and all its related terminology.
It is in this way that Economics, as a subject can impact your life in the most efficient ways. Be it the study of Science or Arts; this subject will be helping you in defining the aspect of life, in and around you.
Now comes the major part, the divisions in Economics:-
Going by two popular branches in Economics, it is divided into Macroeconomics and Microeconomics. Now, the definition of Economics is discussed above. What is needed is the definition of Microeconomics first and then the Macroeconomics.
What is Microeconomics?
- Micro as the definition means in a small cohort or the study of each individual. Microeconomics is the study of each and every individual. The consumer theory is the manifestation of this Microeconomics.
- When you study the behaviour of each and every individual then it is the Micro portion of the economy that you are studying. There are cases where the fine line of Micro and Macro gets blurred. But the sharp contrast can well be established by taking examples from the daily life.
Like when a person saysA visits the shop and buys some goods, he has a set of preference and purchasing power. Now another person, B will not be having similar set of preference or brand fixation as A.
The purchasing power will also be different. That is why a shop has varied kinds of products. So, the behaviour pattern of A and B is studied differently and not clubbed. This is what is known as Microeconomics. Studying each unit minutely is the best thing that can be done to do justice to this subject.
Now, the other part of Economics is the Macroeconomics. What is that?
It is the summation of the entire micro unit or the behaviour of the economy as a whole. When each individual’s behaviour is taken as a whole it is Microeconomics.
Like we can say that each of the micro-unit or each of the individual forms a part of the economy. If we sum their entire preference pattern or notice the behaviour pattern as a whole, it is the Macro part. It gives us a way to define how the economy works as a whole.
How the functioning of the economy is going on. Study of Macroeconomics is difficult and also includes the government and the investment in it.
For studying the parts of Macroeconomics or to have a clear view of the functioning of the economy, Statistics is of extreme importance. Knowledge of Statistics is required in understanding the happenings and drawing conclusions.
Though the scope of Macroeconomics is huge, yet people find it difficult sometimes to grasp the essence. However, the study of Microeconomics is very much easier and people opt for studying this.
From the above discussion what is made clear is the fact that Economics has two branches. One is Microeconomics which is the study of individual behaviour. After studying this you can be an analyst giving insight into a business plan for further expansion of the business.
In Macroeconomics, you get a clear view of the economy as a whole. And you come to know about the fluctuations in money market and commodity market, the inflation, the rupee getting depreciated, the export and the import.
What is the scope of Micro and Macro as a subject?
- The scope of macroeconomics is huge and reaches to being economic advisors to many companies. You will be entrusted with a lot of responsibilities to cater to the company.
- The uses of Microeconomics is however mandatory in building a strong base in Macroeconomics. You tend to have a one to one connection with customer profiling first in order to have a view of the economy as a whole.
- Apart from all these, further study is a major option in Economics. You can be a research scholar, bring in new ideas to impact society and pursue your own genre. Studying abroad is a huge scope for Economics. You can easily get in a chance to study in any of the leading Universities abroad.
- BusinessBusiness Journalism is also another scope for studying Economics. There are institutes which actually wants people with a sound background in Economics to join their team in leading business papers. You can be a columnist or a reporter there. So, the scope of Economics is far-reaching and has got no limits as of now. The market is also expanding in order to give way to more options for everyone. Being an Economist in true sense means being a rational human being and you can think of it as a career option.
Apart from the information provided, you can refer to a website named Investopedia for any further queries. You can also visit the website of Khan Academy to gain more knowledge related to Macroeconomics and the functioning of the economy.
Know the Definition and Scope of Macroeconomics and microeconomics
Macroeconomics and microeconomics though they sound totally contrasting they are complimentary in a role that is they are unique in their role but are quite interdepended.
So before getting into our topic of concern let us first know what is economics?
Economics is a science basically a social science which is mostly concerned with production, distribution and consumption of goods and services of all kinds.
The field of economics basically revolves around the allocation of different resources and determination of different ways to organise various sectors of business and organisation to get maximum return aka output aka profit.
Now that we got some hints about the branch of economics, let us now get to know about its divisions in details. So basically the branch of economics is divided into two broad categories they are macroeconomics and the other is microeconomics which is categorised on basis of its usage in a broad and narrow spectrum.
Macroeconomics as the name suggests is used in a broader spectrum unlike the microeconomics which is a used in a narrow spectrum.
Definition of microeconomics:
Microeconomics is basically part of economics which deals with the study of individuals or individual business decisions that is it is a study of decision made by people on an individual basis or individual business regarding the allocation of resources and prices of goods and services of all kinds.
Definition of macroeconomics:
Macroeconomics is a part of economy which deals with the studies of the behaviour of a country and how the policies put an impact on the existing economy as a whole. This branch deals with the broader spectrum of economics. In simple or in lay man’s language macroeconomics is concerned with the decisions of one’s country and its government issues as a whole.
Now that we got to know the definitions of the two main terminologies that is microeconomics and macroeconomics let us get deeper in this regards to expand our knowledge in this field of economics.
As we have already discussed the definition of this term lets gain some deeper knowledge in this. Microeconomics considers the taxes and its regulations made by government.
Here in this case the approach followed is the bottoms up approach that helps analyse the economy. And it aids the process of economy by focusing on demand and supply of various products that directly or indirectly determine the price levels in the economy.
The bottom-up economics is mostly concerned with the understanding of human choices and resource allocations on an individual basis.
But this field is not very much concerned about the different forces that come to play in the economy instead it deals how a company should play its role to maximise profit with minimum expense and how a company should move forward in its path competing with the other bigger companies. There are many principles which microeconomics deals with, they are:
- The concept of demand, supply and equilibrium- the microeconomics is very well known to deal with the concepts of demand, supply and equilibrium where prices are determined by the concept of demand and supply. In this sector there is an equilibrium between the price demanded by the consumer and the product supplied by the seller in accordance with the consumer.
- The theory of production: the microeconomics has a tremendous role to paly even in this production theory.
- Concept of cost of production: this concept is simple as it sounds that is the price of the produce is fixed as per the cost of the resources used during the production process
- The concept of labour economics: this concept basically focuses on the workers and the labourer and how their pattern of wages and income are needed to be understood.
After having some brief knowledge on this term let us now get a little in our approach. Macroeconomics as we have discussed focuses mainly on the economic discussions occurring on a wider grounds or broader scale that is macroeconomics deals with the economic discussions of the country or its government as a whole.
Unlike the bottoms up approach in that of microeconomics here the approach and the concept is quite contrasting. The approach followed here is the top-down approach as this part of economics analyses entire industries and its economics and not specifically the individual companies.
Here it tries to answer questions relating to the rate of inflation that is what should the rate of inflation be?
Apart from this the approach it takes is a bit broader in dimension as it examines a worldwide phenomenon of the economy such as a gross domestic product that is GDP and how it varies with change in unemployment, national income.
Growth rate and change in levels of price. Apart from this macroeconomics is known to analyse how an increase or decrease net export of a country affects the total capital.
In addition to this, macroeconomics has a role to play in the fiscal policies of the government but its role is not well pronounced in fields of specific investments.
Difference between the microeconomics and macroeconomics:
- Microeconomics deals with economic discussions of an individual or a company where macroeconomics deals with the economic discussions of the country and its government as a whole.
- In case of microeconomics bottoms-up approach is followed whereas in case of macroeconomics top-down approach prevails
- In case of microeconomics, investors can use this economics in theory investments but macroeconomics can only be used as a tool to the craft economy and fiscal policies of government.
After a thorough look into both of the topics we may find no reason not to tag these terms contrasting but if go into its deeper sections we may see that though they look contrasting they are somewhat complementary in their role. In simple terms the two categories which may seem completely contrasting are basically contrasting that is one concept is directly or indirectly dependent on the other. We may see cases where we find the matters concerning microeconomics depend directly or indirectly on the concepts of macroeconomics.
Nancie L Beckett is a very famous content writer and a renowned blogger with an MBA degree having 6 years of experience in this field. Johnson has considerable amount of experience in writing, content writing, it’s marketing and editing for various business and non-profit organizations and holds an MBA degree from the famous Stanford Graduate School of Business in USA.