Chap 5-Microeconomics & Macroeconomics

Some Of The Differences Between Micro- & Macroeconomics

Microeconomics Macroeconomics

Entire economy e.g.

Single market e.g. milk
Singapore

Average price levels in an

Price of a good/service economy
(inflation/deflation)

Individual/market demand Total demand in an economy

Individual firm/market
Total supply in an economy
supply

Government intervention in Government intervention in

a market e.g. cigarettes the economy e.g income tax

Reasons for differences in Unemployment & minimum

workers wages wages

 Microeconomics is the study of individual markets & sections of the economy, rather than the
economy as a whole
o It examines the different choices individuals, households & firms
o It examines what factors influence their choices
o It examines how their decisions affect the price, demand & supply of goods/services in a
market
 o It examines how Governments influence consumption & production
 
 Macroeconomics is the study of economic behaviour & decision making in the entire economy,
rather than just an individual market

o It examines the role of the government in achieving economic growth & human

development through the implementation of specific government policies
(fiscal, monetary & supply-side)
o It examines the role of the government in achieving price stability, low unemployment
& a stable Current Account balance on the Balance of Payments account
o It examines the interaction of the economy with the rest of the world
through international trade

Decision Makers in Micro & Macro

Decision Makers & Their Choices In Microeconomics

Decision
Choices They Make
Maker

Consumers  Which combination of

goods/services do they value
the most
 How to respond to changes in
markets they consume in
 How much money to save,
spend or borrow

Firms  Which combination

of goods/service to supply
 How to best produce
goods/services in order to
meet their objective (usually
profit maximisation)
 How to respond to changing
market conditions

Government  Which policies will be most

effective in addressing specific
market failures
 Which industries/markets are
essential & require
 government support

Decision Makers & Their Choices In Macroeconomics

Decision
Choices They Make
Maker

Consumers  How to best respond to

changing macroeconomic
conditions such
as recessions or interest
rate rises

Firms  How to best respond to

changing macroeconomic
conditions such as recessions,
interest rate rises or a low
supply of labour
 Whether to sell their
goods/services locally,
nationally or internationally

Government  Determining the best

combination of policies that
will help them to meet all of
their macroeconomic aims

Multi  Which countries to invest in

national  How to best develop
corporations international advantages
(MNCs)  How to engage with the
government & local workforce
in a way that maximises
profit without harming the
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