Microeconomics and Macroeconomics

Microeconomics and Macroeconomics

Economics studies, in general, how resources are allocated. Let’s look at what the difference between microeconomics and macroeconomics really is. Microeconomics focuses on economic factors such as the way consumers behave, how income is distributed, and output and input markets. The most important thing to remember to differentiate between microeconomics and macroeconomics is that microeconomics studies are limited to the industry or firm level.

We’re looking at how the consumers behave toward a specific industry, toward specific product, or toward a specific company. How income is distributed for that specific company or for companies within a specific industry. The output and input markets for those specific industries or for a specific company. The factors considered help determine production decisions of individual firms or companies based on their resources and the cost that they would have to put in to be able to make a profit. Microeconomics is just focusing on specific industries or on specific companies.

Macroeconomics examines economies on a much larger scale than microeconomics. Here’s the important thing to remember to differentiate with macroeconomics. Studies look at economic trends and structures on a national level. It’s not just looking at one industry or one company. It’s looking at a whole country to see how that whole country’s economy is faring. What trends do they see? What structures? What’s the market like in that country? Not just necessarily in a specific industry or for a specific firm or company. To remember that: “macro” is much larger, so it’s a national level. “Micro” is smaller, so it’s on the industry or firm level.

Those are the important things to remember to differentiate here. Now, with macroeconomics there are some different variables that are looked at and studied to look for these trends for a whole nation’s economy. They look at output of the whole nation and consumption of the whole nation. What are they putting out and what are they actually consuming? All the industries all the consumers. What are all the producers able to put out? What are all the industries able to put out? What are the consumers actually consuming? How much is actually being purchased and used?

Investment: Government spending. How much is the government having to spend to keep markets stabilized, or are they spending too much and making the markets inflated? Net exports: How much are we actually producing that we get to ship out of the country and make an external profit on it? We’re not just making a profit off of people that live in our country, but we’re making a profit in money coming in from the outside. We’re not looking at very specific things for one industry or company. We’re looking at everything as a whole for the whole nation with macroeconomics.

The overall economic condition of a nation is defined as the Gross Domestic Product, or the “GDP”. The GDP measures the nation’s economic output over a limited time period, such as a year. It would say how much the nation was able to put out over what it was actually taking in. What’s the Gross Domestic Product that we were able to produce? Important things to remember: Economics is always going to be studying how our resources are allocated, how people are buying things, how people are selling things, how things are balancing out or not balancing out. Microeconomics is going to focus on a specific industry or firm or company, where macroeconomics is going to focus on the economy of a nation as a whole.


Return to Economics Videos



by Mometrix Test Preparation | This Page Last Updated: July 25, 2023

Get Actionable Study Tips
Join our newsletter to get the study tips, test-taking strategies, and key insights that high-performing students use.
Get Actionable Study Tips
Join our newsletter to get the study tips, test-taking strategies, and key insights that high-performing students use!