SCOPE OF ECONOMICS

MICRO & MACRO ECONOMICS

The terms ‘Micro & Macro’ Economics were first
introduced by Ragnar Frisch of Oslo University in
1933.The term Micro is derived from the Greek word
‘Mikros’ meaning small & the term Macro is derived from
the Greek word ‘Makros’ which means big or large.

Microeconomics focuses on the individual parts of the

economy.
How households and firms make decisions and how
they interact in specific markets
Macroeconomics looks at the economy as a whole.
How the markets, as a whole, interact at the national
level.
Definitions of Micro Economics
 According to A.P.Lerner,”Micro Economics consists of
looking at the economy through a microscope, as it
were, to see how the millions of cells in the body
economy-the individuals or households as consumers,
and the individuals or firms as producers play their
parts in the working of the whole economic organism.”
 According to K.E.Boulding,”Micro Economics is the study
of particular firms, particular households, individual
prices, wages, incomes, individual industries and
particular commodities.”
 According to Leftwitch, “Micro Economics is concerned
with economic activities of economic units as
consumers, resource owners and business firms.”
Importance of Micro Economics
 It helps in price determination.
 It helps in allocation of resources.
 It helps in determining economic
policies of the Govt.
 It serves as the basis of welfare
economics.
 It helps in determining equilibrium of
the economy.
Limitations of Micro Economics
 Concept of Marginalism.
 Unrealistic assumptions of full
employment & lassiez-faire policy.
 It ignores aggregates.
Importance of Macro Economics

 It includes the study of aggregates.

 It helps in economic planning.
 It helps to study national income.
 It helps to understand general price
level-inflation & deflation conditions.
 It analyses business cycles.
Limitations of Macro Economics

 Aggregates do not reveal features of

individual units.
 It leads to excessive generalisation.

It leads to inconsistent aggregates.