What is economics microeconomics and macroeconomics. Macroeconomics and microeconomics as two components of economic theory
Modern economic theory consists of two sections - micro- and macroeconomics.
Microeconomics explores the behavior of market agents, which include, first of all, households and firms. It also studies the functioning of specific markets and sectors of the economy in which these agents operate. Macroeconomics pays the main attention to the analysis of supply and demand in specific markets, prices and volumes of output of individual goods and services. Its ultimate goal is to show how the individual decisions of households and firms and the interaction of multiple markets allocate scarce resources to innumerable competing alternative directions.
Unlike microeconomics, macroeconomics studies the functioning of the economy as a whole. This is the science of aggregated, i.e. collected in a single whole, the behavior of many individuals and firms pursuing their own goals. It focuses on the cumulative characteristics, dominant trends and consequences resulting from the activities of a huge number of economic agents that make their own decisions. Although macroeconomics uses the same key concepts as microeconomics, they nevertheless view the economy from different angles.
In contrast, macroeconomics focuses on the total production of goods and services and on measuring the average price level. Therefore, macroeconomic research is based on large amounts of statistical data that are used to calculate aggregated economic indicators. In the future, economists try to identify and establish various kinds of relationships and interdependencies between these aggregate variables. This gives economists the opportunity to explain the interrelationships of key factors that have a decisive influence on economic development. Orientation theory to understand the general equilibrium at the same time involves taking into account the state of the labor market, the market for goods and services and financial markets. The collected statistical data can be used both to verify the correctness of existing theoretical constructions, their correspondence to historical experience, and to put forward new hypothetical dependencies and their quantitative measurements.
Leaving aside the excessive detail associated with the operation of specific markets and industries, macroeconomics tends to broad generalizations. The focus of her attention is, for example, such problems: why some countries are rich and others are poor; what explains the increase or decrease in average prices for goods and services; what are the causes of unemployment and why governments cannot provide full employment; What causes economic crises and what determines their duration? Such questions are precisely the subject of macroeconomic research.
This circumstance brings macroeconomics closer to solving the problems that governments face in the conduct of economic policy. Macroeconomics allows you to understand the relationship between the economic policy pursued and the results of the functioning of the economy. The most important task facing macroeconomics remains to answer the question of whether the government can improve the overall efficiency of the economy. More specifically, whether government actions, especially its monetary and fiscal policies, have a significant impact on overall economic trends.
Most researchers conclude that central bank monetary policy and government fiscal policy affect the prevailing trends in output, prices, employment, and international trade in a certain and largely predictable way. Some scientists are convinced of the need for the government to conduct monetary and budgetary policies that affect economic trends. An active government policy aimed at reducing inflation and unemployment, they believe, can improve the functioning of the economy. At the same time, others do not see the point in this, because they believe that this is almost impossible to achieve, and any attempts to change the current situation do more harm than good. In any case, macroeconomics, while not giving unambiguous answers, nevertheless sheds light on the essence of ongoing disputes and thus helps voters and politicians to develop and make responsible decisions. At the same time, it provides an incentive for a deeper study of its subject in order to achieve greater clarity in understanding the problems that must be resolved in practice.
As a science, macroeconomics is constantly evolving. Changes occur under the influence of two groups of factors. First, as in any other science, new theories are constantly emerging in macroeconomics, while established concepts either cease to correspond to reality or give way to new ones that come to replace them. Secondly, the economy itself has become more dynamic and raises new questions for researchers that need to be answered adequately and meaningfully about the ways of economic development. Thus, in recent years, there has been an increase in the relationship between the economies of individual countries due to the internationalization of markets for goods and services and the liberalization of cross-border capital flows. This has become one of the reasons for the rapid spread of the financial crisis that caused the global economy to decline. Being a scientific discipline closely related to real life and not just a tool for theoretical research, macroeconomics has faced real challenges.
Features of micro-level economics
Definition 1
Microeconomic science deals with the study and analysis of the economic activity of the subjects of the economic system: households, enterprises and organizations. All processes and decisions made within these subjects are part of microeconomics. Therefore, this discipline examines the processes of an economic nature at the local level.
The microeconomic task facing almost every private entrepreneur is to maximize profits. That is why business entities are doing everything possible (according to existing laws and the current situation on the market) to produce as many products as possible and set the highest possible price for them.
Consumers in this case try to purchase the necessary goods at the lowest price. However, unlike the seller, the volume of purchased products is limited by individual needs, and it is not worth the goal to get as many as possible.
Remark 1
The difference between microeconomics and macroeconomics is its focus on the study of local economic systems and objects, and not problems of a federal or global scale. Therefore, the term "state" is not typical for this discipline.
The main activities in the micro-level economy are production, exchange and distribution activities.
Also, the tasks of microeconomics include explaining the reasons for making certain economic decisions by business entities, as well as the factors that influence these decisions. An example is consideration of the issues of decision-making by the company's management on the number of employees, the actions of buyers when choosing goods, the impact on buyers of changes in the price level and individual income, etc.
When making decisions by economic entities, supply and demand factors are of great importance.
Demand is the amount of goods or services that a consumer is willing to buy at a given price. A decrease in prices causes an increase in demand, and an increase - its decrease. Thus, in microeconomic science there is a technique for constructing a demand curve based on price changes. Also, demand is influenced by the level of income of the population, consumer preferences of buyers, brand awareness, etc.
A supply is the amount of goods or services that a seller can offer based on product prices, production capability, cost of goods, tax rates, and other factors.
Features of macroeconomics
Macroeconomics deals with the study of the entire economy as a whole and covers a wider area, in contrast to microeconomics. The founder of macroeconomic science is D. Keynes. Such a scope allows us to answer many relevant questions by considering the following areas:
- the unemployment rate;
- The value of general inflation;
- Growth, stagnation and recession of the economic system;
- GDP dynamics;
- Aggregate cash flows;
- world exchanges;
- The total value of imported and exported products by the state;
- Rates on credit products;
- General purchasing power of the population;
- Investment attractiveness;
- Gold and foreign exchange reserves and total public debt.
Important components of macroeconomics include: GDP, GNP, inflation rate, exchange rates of major currencies and the overall unemployment rate.
Analysis of the macroeconomic level involves the establishment of the main factors affecting the functioning of the economy, in the interaction of product markets, labor markets and financial resource markets, as well as the features of the functioning of the national economy as a whole.
In conducting its analysis, microeconomic science applies the same principles and methods that microeconomics uses. The general methods and principles are:
- abstraction;
- Methods of deduction and induction;
- Normative and positive analysis;
- The principle "ceteris paribus";
- Assumption about the effective behavior of business entities.
Remark 2
The peculiarity of macroeconomics is that its most important principle is aggregation. The study of economic interdependencies and patterns at the macro level becomes possible only when considering aggregates or aggregates. Aggregation is the combination of separate parts, aggregates, into one whole.
Macroeconomic agents include:
- Households;
- Enterprises;
- Government sector;
- foreign sector.
The relationship of micro- and macroeconomics
Modern economic theory is divided into two large sections - microeconomics and macroeconomics.
The subject of study of microeconomics is the analysis of the behavior of individual economic units. This section includes research in the field of volumes and prices of consumption, production of goods and services.
The subject of study of macroeconomics is, on the contrary, the analysis of the functioning of the economy as a whole and its large areas. The object of study includes the social product, the national product, economic growth, the overall level of employment, consumer spending, national savings and other general indicators.
Microeconomics and macroeconomics are closely related:
- Macro-level phenomena and processes are formed as a result of the interaction of individual economic entities and are determined by the decisions made;
- These decisions are made in some macroeconomic environment and are significantly dependent on it.
Thus, microeconomic and macroeconomic sciences are interrelated disciplines that differ in their scope and objects of study. Macroeconomics implies consideration in a more generalized, global form, and microeconomics considers the interaction of individual entrepreneurs and individuals.
Structurally, modern economic theory is divided into two sections: microeconomics and macroeconomics. Microeconomics studies the behavior of individual economic agents: individuals, households, enterprises, owners of primary production resources. It focuses on prices and volumes of production and consumption of specific goods, the state of individual markets, the distribution of resources between alternative goals.
Macroeconomics studies the functioning of the economic system as a whole and its major sectors. The object of its study is the national income and social product, economic growth, the overall level of employment, total consumer spending and savings, the general price level and inflation. Microeconomics is also often referred to as price theory, although it studies only relative prices, i.e. relative prices of individual goods, leaving the problem of the absolute level of prices to macroeconomic analysis, which is sometimes also called the theory of national income and employment. We can say that microeconomics sees only individual trees, not seeing the forest behind them, while macroeconomics does not distinguish individual trees behind the forest. Or, in other words, macroeconomics studies the factors that determine the size of the "social pie", while microeconomics is interested in its composition and distribution.
Of course, there is no Chinese wall or iron curtain between microeconomic and macroeconomic processes. Macroeconomic processes are largely initiated by the decisions of individual economic agents, and these decisions, in turn, are made in a certain macroeconomic environment and significantly depend on it.
The main research method used by economic theory is the modeling of economic phenomena and processes, i.e. the study of objects of knowledge not directly, but indirectly, through the analysis of some auxiliary objects, which are called models. Unlike many natural and especially technical sciences, economics, as a rule, is dominated by ideal modeling, which is based not on the material analogy of the object of study and the model, but on the analogy of the ideal, conceivable. Ideal modeling can be divided into two classes: sign and intuitive.
In economic theory, sign modeling is usually used, in which models are sign formations, usually formulas and graphs. At the same time, sign formations and their elements are specified together with the rules by which one can operate with them. Note that sign models also include words and sentences in some natural (for example, Russian or Chinese) or artificial language.
Economic models must, in principle, meet a number of requirements: the content and realism of the accepted premises and assumptions, predictive ability, the possibility of information support and verification, generality, and a number of others. There is no consensus among economists about which of these requirements is "more important." Some consider the main requirement that the model must satisfy is its predictive ability, while others see the reality of the assumptions made and the ability to explain the behavior of economic agents through the model as such a criterion. Most associate the requirements for the model with the specific purpose for which it is intended. Predictive power is important for models that aim to predict the effects of some economic parameters on others (for example, the impact of taxes on sales of a product). Realistic assumptions and explanatory power are important for models whose purpose is to explain the behavior of economic agents.
Graphical models have an explanatory ability to a greater extent. The advantage of "pictures" is their compactness, clarity, easy visibility of all relationships between variables. But they also have a disadvantage. Easy-to-read "pictures" are two-dimensional, while three-dimensional ones are no longer so easy to read, and multi-dimensional "pictures" do not exist at all. This limits to some extent the explanatory power of graphical models in economic theory.
Two types of models are used in microeconomics: optimization and equilibrium. When studying the behavior of individual economic agents, optimization models are used. Therefore, the basic working concepts here are of a marginal nature: marginal utility, marginal product, marginal cost, marginal revenue, etc. This was the basis for calling such a methodology of economic analysis marginalism, and those who use it, marginalists (from the English margin - limit). Both of the latter terms were introduced by the English economist J. Hobson (1858-1940) in the works "Industrial System" (1909) and "Labor and Wealth" (1914) and were disparaging. It persisted for a long time in Russian literature.
The term "margin" owes its penetration into economic theory to two English economists - the little-known T. Chalmers and the last representative of the classical school, John Stuart Mill.
The second type of models - market equilibrium models - is used in the study of relationships between economic agents. It is usually assumed that the system is in equilibrium if the interacting forces are balanced and there are no internal impulses to disturb the balance. Market equilibrium models are a special case of a wider and more general class of models of economic interaction between market agents. They allow us to explore not only equilibrium, but also non-equilibrium states of the economy. However, disequilibrium analysis is not usually included in standard microeconomics courses.
Equilibrium models play such an important role in microeconomic theory for the following reasons. The fact is that individual market participants, individuals (households) and enterprises, can optimize their position only if they know all the prices for the resources they consume and the benefits they offer. However, an individual entity usually cannot have a definite opinion about how he could use his funds at an arbitrarily given price level. In practice, he must confine himself to deciding how much of a certain commodity he could buy or sell with a slight change in its price, but on condition, however, that the prices of all other commodities remain unchanged, for only under such an assumption does the monetary unit have a completely clear meaning.
During periods of high inflation, when the absolute prices of all goods are growing rapidly, but growing to varying degrees, the subjects of market relations lose their understanding of the value of the monetary unit. It would seem that in this situation, the assumption of the state of equilibrium, which is the basis of microeconomic models, loses its meaning. However, it is not. Equilibrium models remain in this case the only tool that allows the analyst to distinguish in the behavior of market entities what is due to changes in the price level, and what is due to changes in their ratios. And in the same way, equilibrium models between aggregate demand and aggregate supply are the basis of macroeconomic analysis of fluctuations in the level of economic activity, employment, and inflation.
Source - Galperin V. M. et al. Microeconomics, Institute "Economic School", St. Petersburg, 2004
Macro- and microeconomics are important sciences in terms of studying ongoing economic processes. What are they studying? How? These, as well as a number of other questions, will be answered within the framework of the article.
general information
What is macro/microeconomics? The theory on this score has a clear division. Macroeconomics deals with the study of the functioning of the economy of a country or industries in general. For her, such general processes as growth, unemployment, government regulation, budget deficit, and so on are of interest.
Macroeconomics operates with terms such as aggregate supply and demand, GNP, GDP, balance of payments, markets for goods, labor and money. Aggregate indicators are widely used.
Whereas microeconomics deals with the study of agents during the implementation of production, distribution, exchange and consumer activities. That is, the main difference is at what level they work. And now let's take a closer look at what macro- and microeconomics are.
Overall plan
Macroeconomics studies the patterns of functioning and development of the economic sector of a country or several states. For it, unlike microeconomics, individual markets and pricing features under different types of competition are not of interest. When working on a macroeconomic plane, there is a need to abstract away from differences and reliance on key points. In this regard, interesting points emerge.
Research Features
Emphasis will be placed on macroeconomics, although attention will also be paid to microeconomics to clarify certain points. So:
- Macroeconomic analysis uses aggregated values. An example would be GDP. Whereas microeconomics is interested in the output of a separate enterprise. Also of interest to macroeconomics is the level of prices in the economy, and not the cost of specific goods. Aggregated aggregates combine both producers and buyers.
- Macroeconomics during the analysis does not take into account the behavior of individuals, which are households and firms. Whereas for microeconomics they are independent.
- When working at the state or industry level, there is a constant expansion of the number of subjects that create the economy. Macro- and microeconomics include foreign consumers and producers. True, when using microanalysis tools, external economic factors, as a rule, are not taken into account.
About macroeconomics
This science is not just a mechanical sum of all elements of the economic sector, in which there are various local, regional, resource, industry markets and many consumers and producers. Macroeconomics is also a set of economic relations that connect and define the individual elements of the national economy into one single whole. The indicators of this are:
- The presence of a division of labor between large areas of production (not only within the entire economy, but also in individual regions).
- Labor cooperation, which provides production and the relationship between different structural units.
- The existence of a national market, which is a whole economic space of the state.
Macro- and microeconomics also differ in that for the first the foundation is material wealth. In a broad sense, this term is understood as the totality of all resources that are in the country and that are needed in order to ensure the production of the necessary goods. To do this, there must be a specific economic base that can provide for the existing national interests and needs.
This largely depends on the policies and existing infrastructure. At the same time, it is worth noting the role of the financial market in macro- and microeconomics. With the right government policy and the honesty of the people who use its services, you can get a significant increase in the economy. And vice versa - if you act connivingly, then the negative effect will be extremely strong.
About microeconomics
She studies at the level of individual enterprises and households. Thus, using the tools of microeconomics, one can study why consumers choose a certain set of goods, buy from a particular enterprise, how prices are formed, and how cost-effective the market methods used are.
Thus, considerable attention is paid to aspects of the organization of production and marketing. At the same time, the needs of households, the specifics of their activity in specific markets, interest rates in banking institutions for certain needs are also studied - that is, everything that is the building blocks for the construction of a modern economy.
Conclusion
Here we have considered the concepts of macro- and microeconomics. Of course, their specificity is that just knowing this information is not enough. You also need to know how to apply it in practice. And with this, alas, there are often significant problems. But on the other hand, the information that appears to be macro- and microeconomics serves as a basis for subsequent activities.
The most effective way to get new data is But the number of bruises can be significantly reduced if you use the available information offered by the world wide web and various preparatory courses that are massively organized by various non-state formations.
Microeconomics analyzes the economic activity of primary cells (firms, households, owners of factors of production). It explains how economic decisions are made at the level of these cells and how they are implemented through the prices of factors of production and economic goods. Therefore, the mechanism of market pricing in the markets of individual goods and the problem of partial market equilibrium are at the center of microeconomic analysis.
Macroeconomics - a branch of economic science that studies the behavior of the economy as a whole in terms of ensuring conditions for sustainable economic growth, full employment of resources, minimizing inflation and balance of payments. Macroeconomics, as a special independent part of economic theory, appeared in the 30s of the twentieth century. Its appearance is associated with the name of J. M. Keynes and his work "The General Theory of Employment, Interest and Money" (1936).
Unlike microeconomics, macroeconomics uses in its analysis aggregate quantities that characterize the movement of the economy as a whole: GNP (and not the output of an individual firm), the average price level (and not the prices of a particular product), the market interest rate, inflation, employment, unemployment and etc.
Macroeconomics is the science of aggregated behavior in the economy. eleven
Microeconomics and macroeconomics are interdependent in the real economic environment and interact with each other. Macroeconomic factors affect the decisions of households and firms on the amount of savings, investment, consumer spending, which, in turn, determines the size and structure of aggregate demand.
Despite the different levels, micro- and macroeconomics in the general analysis and use of the results are subordinated to a single goal - the study of patterns and factors of economic growth in order to meet the needs of society. Micro- and macroeconomics are not two separate sciences, but separate branches of a unified economic theory that have a common subject of study. Macroeconomics is a constantly evolving science. There is no such diversity of views on the same problems in any branch of macroeconomic theory.
The system of national accounts and its role in a market economy
All indicators of the system of national accounts reflect the current volume of production, distribution and consumption, but not accumulated wealth in previous periods. At the same time, its value in many respects is decisive for a correct assessment of the macroeconomic parameters of the economy.
national wealth- a set of resources and other property of the country, creating the possibility of producing goods, providing services and ensuring the lives of people. It includes reproducible, non-reproducible and intangible property, as well as the balance of property obligations and claims in relation to foreign countries
Irreproducible property- these are agricultural and non-agricultural lands, minerals, as well as historical and artistic monuments and works.
Reproducible property includes productive assets (fixed and working capital) and non-productive assets (property and stocks of households and non-profit organizations).
Intangible property - it is, first of all, intellectual property (patents, trademarks, objects of copyright, etc.), as well as the intellectual potential of the nation.
National wealth is thus a measure of the results of economic development over many cycles of GDP production.
Specialists of the World Bank for Reconstruction and Development (IBRD), emphasizing the importance of this indicator, proposed to evaluate the rating of countries in terms of “national wealth per capita”, in contrast to the traditional assessment in terms of GDP, per capita income, production growth rates, etc.
The role of macroeconomic indicators
Management is an element of any labor process. Proper governance is a prerequisite for the success of any economic activity, both on the micro and macro scales.
The condition for making correct management decisions is the collection and analysis of information about the state and dynamics of the development of the managed object. This act of management is so important for the implementation of the management process as a whole that in politics the possession of information is reasonably identified with the possession of power.
Macroeconomic indicators in each country have their own characteristics, but in general they are comparable, since they reflect essentially the same economic characteristics. Only the indicators of the countries of the former socialist camp and the leading capitalist countries differed significantly, since they expressed different ways of managing the national economy and were created using different methods. The methodology used in the USSR had the following significant drawbacks:
The total (gross) social product contained an assessment of the production of material production, but it did not include a significant part of the service sector;
The sum of the total social product contained a repeated account, i.e. initial and intermediate products were taken into account in one indicator several times, which distorted the real results of economic activity;
The scorecard was underdeveloped, especially in the area of finance.
After the formation of the UN, when they began to sum up the annual results of the economic and social development of its member countries, it became obvious that common standardized indicators of economic development throughout the world were needed. This need was also dictated by the rapid development and increased integration of the world economy.
The System of National Accounts (SNA) serves the same purpose on a macroeconomic scale that accounting serves in an enterprise: it allows you to respond in a timely and adequate manner to changes taking place in the national economy. Various indicators that are included in the system of national accounts make it possible to measure the volume of production at a particular point in time, to reveal the factors that directly determine the functioning of the economy and, ultimately, to implement the correct state economic policy.
The first attempts to create the SNA were made in Great Britain in 1946, in the USA in 1947, in France in 1949. The standard system of national accounts developed by the UN Statistical Commission has been used since 1953. A significant contribution to the development of the modern SNA was made by an American economist S. Kuznets, who won the Nobel Prize in 1971, and the Englishman R. Stone.
The System of National Accounts (SNA), created by each country in accordance with generally accepted international norms, provides a system of criteria by which one can evaluate the results of economic activity, compare them in time and space.
At the same time, the system presupposes certain interconnections, correlations, interactions, dependencies of its constituent elements. A change in one of them can lead to a chain reaction, and the whole set of elements will change. One of the developers of the system of national accounts - Richard Stone In this connection, the rather interesting remark was once made that facts and theories meet in analysis. Their unification is essential for the development of economics, since its subject matter does not remain pure, as in mathematics, where no one requires that the theory be applicable to real phenomena, and it is not reduced to a set of facts in the form of objects from a garbage heap, relationships between which no one cares.
Ownership of the national accounting system will serve as a powerful foundation for macroeconomic regulation.