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What is the difference between macroeconomics and microeconomics?

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Quick Answer

According to Investopedia, microeconomics is the study of decisions made by people and businesses regarding the allocation of resources and prices of goods and services, while macroeconomics is the study of the behavior of the economy as a whole. Microeconomics focuses on individual companies, and macroeconomics looks at countries and governments.

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Full Answer

Microeconomics involves studying a specific company to determine what can be done by the company to increase productivity and lower costs while increasing the product demand and generating a higher profit. It is based on the idea of a market economy in which consumer demand is the driving force behind the prices and production levels of goods and services. The focus is on the concept of the supply and demand.

Macroeconomics studies a country's typical economy-wide indicators associated with the conditions of national economies. It deals with such statistics as unemployment rates, gross domestic product

(GDP), overall price levels and inflation. Although macroeconomics has a much broader focus than microeconomics does, many macroeconomic factors are essential to making predictions and conclusions at the microeconomic level. For instance, knowing what the unemployment rate is at the national level can help a microeconomist predict future layoffs in a specific industry. The studies of microeconomics and macroeconomics are both important to a country's economy.

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