Micro and Macro Economies

Economics is divided into microeconomics (concerned with small scale)  and macroeconomics (concerned with large scale)

Macroeconomics –  is the  study of the whole economy.

-Topics include; the number of people employed in an economy and the changes in the country’s output.

Microeconomics – is the study of the behavior and decisions of households and firms performance of individual markets.

– Topics include; the changes in the earnings in a particular occupation and changes in the output of the car industry.

Connection between micro and macro economics

Microeconomic decisions and interactions add up to the macroeconomic picture. This means that changes in the microeconomy affect the changes in the macroeconomy and vice versa.

For example a reduction in the output of the car industry may result in a rise in that country’s unemployment rate. Similarly, a decision to cut income tax rates may result in households buying more cars.

Decisions makers in macroeconomics and microeconomics

These decisions makers are sometimes referred to as economic agents. They are households, firms and government.

  • Households are known as consumers, savers and workers.
  • Firms and businesses produce goods and services and employ workers and other factors of production
  • Government is the system that rules a country or region. A government produces and provides some of the products, provides financial benefits, taxes, and regulates the private sector.


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