Micro vs Macro Economics
Economics is split into two main branches:
- Microeconomics: The study of individuals and businesses.
- Macroeconomics: The study of the entire economy.
1. Microeconomics (The Small Picture)
Focus: How individuals, households, and firms make decisions.
Key Questions:
- Why did the price of tomatoes increase?
- How does a company decide how many employees to hire?
- Why do people buy iPhones despite high prices?
Topics:
- Demand & Supply (Why prices change).
- Elasticity (How sensitive is demand to price?).
- Market Structures (Monopoly, Competition).
- Consumer Behavior (Why you buy that expensive coffee).
Example:
- Micro: Studying why Zomato increased delivery fees.
2. Macroeconomics (The Big Picture)
Focus: The economy as a whole. National and global issues.
Key Questions:
- Why is inflation 6%?
- What causes unemployment?
- How does the RBI control interest rates?
Topics:
- GDP (How to measure economic growth).
- Inflation & Deflation (Rising/Falling prices).
- Fiscal Policy (Govt spending and taxes).
- Monetary Policy (RBI controlling money supply).
- Unemployment (Why do people not have jobs?).
Example:
- Macro: Studying why India's GDP growth slowed to 5%.
3. Key Differences
| Aspect | Microeconomics | Macroeconomics |
|---|---|---|
| Focus | Individual units (Firms, Consumers) | Entire economy |
| Examples | Price of petrol, Demand for cars | Inflation, GDP |
| Goal | Optimize individual decisions | Stabilize the economy |
| Tools | Demand curves, Elasticity | GDP, CPI, Interest Rates |
4. How They Connect
Example: Petrol Price
- Micro: High petrol price → People buy smaller cars.
- Macro: High petrol price → Inflation rises → RBI increases interest rates.
7-Day Action Plan
Day 1: Read a news article about "iPhone Price Hike" (Micro) and "India's GDP Growth" (Macro). Identify which is which.
Day 2: Understand the Law of Demand. "If price increases, demand decreases."
Day 3: Learn what GDP means. "Total value of goods and services produced in a country."
Day 4: Check the current Inflation rate in India (search "India CPI").
Day 5: Read about "Opportunity Cost" (Micro concept). "What you give up to get something."
Day 6: Understand "Monetary Policy". How does the RBI control inflation?
Day 7: Follow an economics Twitter account or newsletter (e.g., The Ken, Mint).
Quiz
Test Your Knowledge
Question 1 of 5
1. Microeconomics studies:
💡 Final Wisdom: Micro is "Why did this happen?". Macro is "Why is this happening to everyone?". Both matter.