Sunday, February 7, 2010

Interdependence between Micro-economics and macro-economics.

Interdependence between Micro-economics and macro-economics.
Micro- economics is the study of individuals units.Whereas macro-economics is the study of the economy as a whole.Micro-economics takes a given the total output for the economy as a whole,the distribution of output,employment,total spending among the particular goods and services individual industries and firms,the general price level and the relative price level or exchange ratio among individuals goods and service.On the contrary macro-economics takes these are variable.
These sharp distinctions help to clarify the essential difference between macro-economics and macro-economics.Although these two branches of economics seem to be competitive,in fact,they are complementary.They two interdependent rather than being independent.These two branches are mutually supportive.Most economic problems have both economics system can not be attained without proper integration of them.The modern theory of economics integrated the analysis of the behavior of individuals firm and the behavior of the economics as a whole .
Edward Shapiro observes ,"Strictly speaking,there is only one economics'.Macro-economics theory has a foundation in micro-economics theory ha a foundation in macro-economics theory".Gardner Ackley support this view when he says,"The relationship between macro-economics and micro-economics and theory individuals behavior is a two ways street.On the one hand,micro-economics theory should provide the building blocks for our aggregates theories.But macro-economics may also contribute to micro-economics understanding".
An analysis of the economy is not conducted separately in two watertight comportment.If we analysis macro-economics variable and there relationship,we must also allow for changes in micro-economic variable may that affect the macro-economic variables.For example,if the labour is immobile,total employment or total output may be less than they would be with mobility.
To determine the national material will being,we must considers both macro-economic and micro-economics aspects. From the macro-economics viewpoint,the national material welfare will be greater if the economy comes closer to the full utilisation of its total resources.From the micro-economics point of view material being will be greater if the economy comes to optimum allocation of its resources,taking as given the degree of utilisation.Clearly,the basic goal is same from both viewpoint,the maximum materials will being for the population as a whole.This goal can be attend only with both full utilisation and optimum allocation of available resources.
Micro-economics needs the help of Macro-economics.for example,the sale of a firm not only depends own it price but also the total purchasing power of the commodity.the value of profit or a firm depend on aggregate demand.national income and general price level.Similarly,the help of micro-economics is inevitable for macro-economics.For example,nation output and income are the sum the income of income of millions of individuals and numerous firms respectably.Hence,the theory of the study of individual units and aggregate are both equally important.To conclude in the words of P.A. Samuelson,"There is really no opposition between micro-economics and macro-economics.Both are absolutely vital.You are less than half-educated if you understand the one while being ignorant of the other.

1 comment:

  1. Macroeconomics is the study of forest whereas microeconomics is the study of plant in a forest.It is very difficult to distinguish any topic is whether Macroeconomics or Microeconomics as every aspect can be taken as both