Most people I talk to don’t know the difference between the two. Some don’t even know either of these words exists. So, I wanted to take the time to explain the difference between the two and how they affect you on a daily basis. Micro vs Macro economics affects our lives in many ways. In order to understand how they do that we will first discuss what each of them is separately. We will then discuss their impact on our daily lives.
What is Micro Economics?
Microeconomics is just as it sounds it’s economics at the smallest level. Don’t try to over complicate this too much. Microeconomics is mainly concerned with single factors and the effects of individual decisions. Meaning it is a form of study regarding a firm or individual on how each react to the allocation of scarce resources. This also includes the interactions among these firms and individuals. That is how the economy that you are in decides what they are going to price goods and services. So, if you were wondering why that pack of gum cost $2, it’s based on your reaction.
What is Macro Economics?
This is a little bit easier to understand. This deals with the larger scale parts of the economy like interest rates or national productivity. An example for interest rates would be when you hear on the news every time the Federal Reserve is raising interest rates to track inflation. For national productivity that’s when you hear in your economics class a discussion about GDP. Which is just a monetary measure for goods and services produced at a specific time period.
Main Difference Between the Two?
The main difference between the two is that one is at the individual and firm level. While the other is at the global and federal level. One deals with the price of good within an economy. While the other deals with controlling interest rates and national productivity, like GDP and inflation.
Hopefully, this article on micro vs macro economics was helpful. I try to keep things at a service level to give you a base understanding on certain subjects. Economics can be a very tricky subject when you start getting into the weed of things. But if you are going to continue your entrepreneurial/wealth journey understanding what both macro and micro economics are is important. Now that you have a base knowledge continue to seek out more information. You’ll be better for it.