This document discusses microeconomics and macroeconomics. [1] Microeconomics deals with individual economic decisions and variables like prices and consumers, while macroeconomics analyzes aggregates for the whole economy like national income. [2] There are limitations to considering only micro or macroeconomics, so an integrated approach is needed to best understand how the entire economy functions and promote individual welfare. [3] The document provides examples of the scope and goals of micro and macroeconomics.

1. Micro and Macro Economics
Submitted by- Ajay Bhartiya
Enrollment no- 00125503415

2. Introduction
• Economics is omnipresent and form an integral part of our lives.
• Economics influences the prices of the goods and services we buy, as well as the
income we earn at our jobs. The economic condition of the country whether may it
be inflation or unemployment directly affects our finances, growth, and many
other areas that permit us to be self-sufficient.
• Hence economics is the study of how the available resources are managed and
organized to deal with the needs and wants of the society

3. Division of economics
The modern economists divided economics into:
1. Microeconomics
2. Macroeconomics

4. Microeconomics
• It deals with the decision making of single economic variables such as the demand, price, consumer, etc.
• It is narrow in scope and interprets the small constituents of the entire economy.
• It is also known as the price theory because it explains the process of economics resources allocation on
the foundation of relative prices of several goods and services.
• It deals with the flow of various factors of production from a single user of those resources.
• It helps in developing policies appropriate resource distribution at firm level. The functioning of the free
enterprises
• The decisions making criteria of the producers
• The decisions making criteria of millions of consumers
• How through market mechanism goods and services are produced and distributed in the community
• The price building process of products and productive services
• It helps in the formulation of policies for promoting efficiency in the production and the welfare of the
society
• It tells us how economy operates, which is its positive role
• It explains how it should it operate to promote general welfare of the society, which is normative role

5. Macroeconomics
• It deals with the averages and aggregates of the entire economy such as national income,
aggregate savings etc.
• It has wide scope and interprets the economy of a country as a whole.
• It is also known as the income theory because it explains the changing levels of national income
of an economy during a period of time.
• It deals with the circular flow of income and expenditure between different sectors of the
economy.
• It helps in developing policies appropriate resources distribution at economy level such as
inflation, unemployment level.

6. Limitations of microeconomics
• It cannot give any idea how the whole economy functions
• It can not explain why some units of the economy flourish and at the
same other suffer from crisis
• Microeconomics assumes full employment, which is unrealistic
• In capitalistic economic system, full employment is attained very
seldom and only for short time

7. Limitations of macroeconomics
• Macroeconomics ignores the individual actors of the economy
• However, individual welfare is the main aim of economics
• So, increasing national savings at the cost of the individual welfare
cannot be wise
• Macroeconomics overlooks individual difference
• For example, the general price level may be stable, but price of
food grains can ruin the poor

8. Need for integrating micro and macroeconomics
• Microeconomics cannot give any idea how the whole economy functions
• It cannot explain why some units of economy flourish, but at the same
time other has crisis
• Macroeconomics ignores the individual actors of the economy
altogether
• However, individual welfare is the main aim of economics
• Besides, it overlooks individual economic development
• It is essential to consider the composition and structure of the
components
• So microeconomic and macroeconomic theories must be integrated to
understand the functioning of the whole economy