Microeconomics studies individual economic decision-making units and markets, while macroeconomics analyzes the economy as a whole in terms of aggregates like total output, employment and prices. Both have limitations and need to be integrated to fully understand how the economy functions. The major economic problems revolve around efficiently allocating scarce resources to maximize satisfaction and profits while ensuring full employment and economic growth.

1. Micro and Macroeconomics
MD Siyam HossainMD Siyam Hossain
Bangladesh Institute of Business & Technology.Bangladesh Institute of Business & Technology.
Narayangonj,DhakaNarayangonj,Dhaka
Dhaka,BangladeshDhaka,Bangladesh
www.facebook.com/mdsiyamhossain

2. Division of Economics
 The modern economists divided economics into:
Microeconomics, and
Macroeconomics.
1. Microeconomics
 An economy could be looked as a whole or in terms of its decision-making units
 Microeconomics considers economy as units of smaller parts
Microeconomics considers and studies:
 Consuming units (individual consumers and households)
 Production units (firms, farms, businesses and mining concerns)
 Individual production factors (labourers, landowners, capitalists, entrepreneurs), and
 Individual industries (textiles, iron and steel, toy making, transport, power production
and supple, telecommunication, etc)
Microeconomics studies the behaviour:
 Consumers,
 Resource owners
 Business firms, etc
 Flow of factors of production (land, labour, capital) from resource owners to business
firms, and
 Flow of goods and services from business firms to consumers

3. 1.1 Function of Microeconomics
Microeconomics explains:
 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

4. 1.2. Limitation of microeconomics
Microeconomics suffers from following limitations:
 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
2. Macroeconomics
 Macroeconomics looks economy as a whole
 Macroeconomics is concerned with aggregates and average of the entire
economy
 It is also denoted as Income Theory
Macroeconomics is concerned with:
Average National Income,
Aggregate output,
Total employment,
Aggregate demand,
Aggregate supply,
Average general level of price, etc.

5. Macroeconomics studies:
How average and aggregate values are determined
Example: NI, GDP, employment, demand and supply, general
level of price, etc
What causes fluctuation in the NI, GDP, employment, price
level
How the economies grow, and
How maximum employment and income could be achieved?
Macroeconomics theories have been developed mainly in the
Post-Keynesian period
It developed in the last 50 years

6. 2.1 Utility of Macroeconomics
Following are the usefulness macroeconomics:
 It helps understanding complicated fluctuation of economic
development
 It provides a bird’s eye view of the national economy and
economic world
 Microeconomics is useful to formulate policies for growth and
stability of the economy
 It is useful to regulate aggregate employment and national income
 It helps plan national economic growth rate
 It is useful to plan national wage policy
 It helps understanding economy in its dynamic aspect

7. 2.2 Limitation of Macroeconomics
Macroeconomics has following limitations:
 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. 3. 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

9. 4. Major Economic Problems
As resources are scarce:
Major economic problems is best possible use of resources
Ensure maximum satisfaction for consumers
Maximum profit for producers
In short, fundamental economics problems are:
What is to produce?
How to produce?
For whom to produce?
Are the resources economically used?
How full employment is to ensure?
How satisfactory efficiency of national economy could be
achieved?
How satisfactory growth could be achieved?

10. 4. Major Economic Problems
As resources are scarce:
Major economic problems is best possible use of resources
Ensure maximum satisfaction for consumers
Maximum profit for producers
In short, fundamental economics problems are:
What is to produce?
How to produce?
For whom to produce?
Are the resources economically used?
How full employment is to ensure?
How satisfactory efficiency of national economy could be
achieved?
How satisfactory growth could be achieved?