Branches of Economics

Objectives:
• Enumerate the branches of economics;
• Define microeconomics and macroeconomics; and
• Differentiate microeconomics and macroeconomics.

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MICROECONOMICS
Microeconomics
•It is the branch of economics that deals with how individuals,
including people and companies, respond to economic
conditions. For example, the question of what price points will
cause people to switch from buying beef to chicken falls
under microeconomics, as do questions of whether certain
interest rates will cause individual firms will ramp up hiring.

•studies how individual people and businesses function in

specific situation.
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Microeconomics
•It is the social science that studies the implications of incentives and
decisions, specifically about how those affect the utilization and
distribution of resources.

•shows how and why different goods have different values, how
individuals and businesses conduct and benefit from efficient production
and exchange, and how individual’s best coordinate and cooperate with
one another.

•focused on topics near and dear to many business owners’ heart, it’s
often considered more immediately useful and less abstract than
microeconomics, which looks at the economy at large. 4
MACROECONOMICS
Macroeconomics
•Studies how the entire economy of a nation, or even of the
world, functions.

•Economy as a whole

•Trying to understand what drives the business cycle from

boom to bust, or from growth to recession, and what controls
overarching economic indicators such as gross domestic
product, unemployment and inflation. 
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Macroeconomics
•Lends itself less to experimentation than microeconomics,
and the sciences has, in some ways, been shower to develop.

•Trying to understand why certain countries prospered at

different times, and to politicians and central bankers at
places such as the Federal Reserve that are looking to steer
the economy into the future.
 

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 Microeconomics

Individual markets

Differences of
Effect on price of a goods
Microeconomics &
Macroeconomics
Individual labour market

Individual consumer behaviour

Supply of good 3
Microeconomics involves several key principles including (but not
limited to):
•Demand, Supply and Equilibrium: Prices are determined by the theory
of supply and demand. Under this theory, suppliers offer the same price
demanded by consumers in a perfectly competitive market. This creates
economic equilibrium.
•Production Theory: This principle is the study of how goods and
services are created or manufactured.
•Costs of production: According to this theory, the price of goods or
services is determined by the cost of the resources used during
production.
•Labor Economics: This principle looks at workers and employers, and
tries to understand the pattern of wages, employment, and income. 5
The rules in microeconomics flow from a set of compatible laws and
theorems, rather than beginning with empirical study.
Macroeconomics, on the other hand, studies the behavior of a country and
how its policies affect the economy as a whole. It analyzes entire industries
and economies, rather than individuals or specific companies, which is why
it’s a top-down approach. It tries to answer questions like “What should the
rate of inflation be?” or “What stimulates economic growth?”
 
Macroeconomics examines economy-wide phenomena such as gross
domestic product (GDP) and how it is affected by changes in unemployment,
national income, rate of growth, and price levels.
 
Macroeconomics analyzes how an increase or decrease in net exports
affects a nation’s capital account, or how GDP would be affected by the
unemployment rate.
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Cont.
Macroeconomics focuses on aggregate and economic correlations,
which is why it is used by governments and their agencies to
construct economic and fiscal policy. Investors of mutual funds or
interest-rate-sensitive should keep an eye on monetary and fiscal
policy. Outside of a few meaningful and measurable impacts,
macroeconomics doesn’t offer much for specific investments. 

John Maynard Keynes is often credited as the founder of

macroeconomics, as he initiated the use of monetary aggregates
to study broad phenomena. Some economists dispute his theory,
while many of those who use it disagree on how to interpret it.
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Activity
Direction: Write 5 differences between microeconomics and macroeconomics on
the box provided.
Microeconomics Macroeconomics

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Assessment
Direction: Classify the following topic. Write MIC if it falls under Microeconomics; MAC, if it falls under
Macroeconomics.
_______ 1. The inflation rate in the Philippines in the last quarter of 2013 was 4.8%.
_______ 2. A ₱340-billion deficit in the Philippine budget is expected in the year 2015.
_______ 3. Prices of Toyota vehicles are predicted to go up in December.
_______ 4. Garlic prices in the past months have risen because producers hoarded their supplies in
their bodegas.
_______ 5. Unemployment rate has dropped because of the increase in the number of OFWs.
_______ 6. In the past year, Coca Cola was named the fastest selling product in the market.
_______ 7. Rental on land could not be increased by landowners because of the Rent Control Law.
_______ 8. Prices of apples and grapes tend to increase during the c=Christmas season.
_______ 9. The Philippine economy grew at the rate of 5.8% in 2013.
_______ 10. Philippine congress passed the Value Added Tax law to strengthen the Philippine tax
system.
 
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Assignment
1. Write a reflection paper on “How microeconomics and
macroeconomics help you in everyday life?”

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Thank You!!!

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