Microeconomics and Macroeconomics: Basic Differences

Economics is the branch of knowledge which deals with the study of production, consumption, and transfer of wealth incurred during the trade in an economy.

The study of Economics can be conducted at two levels – micro and macro.


Microeconomics is the branch of economics which is concerned with the single factors and influence of individual decision in the economy. It is the study of economic activities of the individual unit and small group of individuals like firm, industry, market, etc.

Any market is primarily composed of two factors – producers and consumers, and economy is greatly influenced by their behavior. Thus, microeconomics deals with various economic variables in an attempt to understand the decision-making process of producers as well as consumers. It studies how consumers and producers make ideal choices and how real market outcomes are influenced by these choices.

Microeconomics also focuses on theories and principles of demand and supply and explains how the price of factors of production and product are determined by the interaction of demand and supply in the market.


Macroeconomics is the branch of Economics which is concerned with the study of large-scale economic factors like national productivity, interest rates, employment rates, etc. It is the study of the behavior of economy at the aggregate level.

Macroeconomics analyzes economics at a broad level. Unlike microeconomics, it is related to the study of whole economy and deals with variables which affect the level of regional, national and global productivity. Thus, it plays important role in policy formation and economic decision-making process at the government level.

Differences between Microeconomics and Macroeconomics

Basis for comparison Microeconomics Macroeconomics
Meaning The branch of economics which deals with the single factors and the influence of individual decision on the economy is Microeconomics. The branch of economics which deals with the large-scale economic factors and studies the entire economy (national as well as international) is Macroeconomics.
Foundation Study of individual entities is the foundation of microeconomics. The microeconomic analysis is the foundation of macroeconomics.
Scope Microeconomics explains the concept of demand, supply, factor pricing, product pricing, demand, supply, consumption, economic welfare, etc. Macroeconomics explains the concept of national income, money, general price level, distribution, employment, inflation, etc.
Application Microeconomic analysis can be applied to determine the ways of improving individual business entities, determining prices of factors of production and product itself, etc. within the economy. Macroeconomics can be used to identify the overall standard or health of the economy and improve the economy by maintaining stability in the general price level and solving problems like inflation, deflation, poverty, unemployment, etc.
Limitations Microeconomics is largely based on the unrealistic assumption of full employment in the economy and ceteris paribus (other things remaining constant). Study of macroeconomics may sometimes involve ‘fallacy of composition’ which means what is true for the whole is true for only a portion.