Thursday, April 15, 2010

Importance of micro-economics

Importance of micro-economics
The popularity of micro-economics has been growing.According to R.G.D Allen "Macro-economics is growing so fast in last three decades that it has brought great changes in the structure of economic theories."
The importance of macro-economics can be analysis on the basis of following headings:
  1. Public policy formulation :Macro-economics is useful for formulation and execution of government policies.The main concern of government is with the people.Hence,the attention of government is focused on general price level.Level of production,volume of trade and so on.
  2. Simple study of all sectors:The study of all sectors need the macro-economic approach.In modern days there are many things to be studies by men.It is almost impossible to study them individually.
  3. Understand general unemployment :The use of micro-economics is useful to solve complex economic problems of present day.The causes,effects and remedies of general unemployment can be understood from micro-economics.The general unemployment occurs due to the deficiency of effective demand.
  4. Evaluate the performance of the economy :Micro-economy is useful to evaluate the performance of the economy based on national income.One the basis of the analysis of national income we can say whether the economy is performing well or not.
  5. Formulate the strategy of economic growth :The study of economic growth the scope of macro-economics.The capacity and source of growth of the economy can be found out from macro-economics.The strategy to increase production income,investment and employment to augment economic growth can like fiscal and monetary policies.
  6. Solution of monetary problems :The monetary policy can be understand and analysis from macro-economics.The inflation and deflation have serious effects on the economy.
  7. Understand trade cycle :There was great depression during 1990s.This drew the attention of economists towards trade cycle.The trade cycle covers whole part of the economy.Hence,it falls within the scope of macro-economics.
  8. Solution of complex economic problem of modern times:Macro-economics deals with some of the challenging issues of modern times such as unemployment,inflation,taxes,government budget,balance of payment etc.
  9. Study of social community welfare :.The study of economic helps to welfare well being of whole nation. The study social welfare is the study of macro-economic problems.The material well being of a nation depends on national income and employment.
  10. Understand the working of the economy:The study of micro-economic is indispensable for understanding the working of the economy.Because the economy as a whole is concerning with behavior of total income,output,employment and general price level.
  11. Understand the behavior of individual units:Macro-economics is important to understand the behavior of individual units.Because the demand for individual products depends on aggregate demand in the economy.
  12. Useful is business decision making :Macro-economics is also useful in business decision making.The knowledge of aggregate demand and supply helps in production and pricing decisions.The macro-economic policies like fiscal policies,monetary policy have profound effects on business activities.


  1. question is abt micro economics!!!
    and explianatin is of macro economics.....