Differences Between Micro & Macro (Cambridge International IGCSE Economics)
Exam board Cambridge International · IGCSEUpdated 2024-06-13
Microeconomics and Macroeconomics
Spec point —
2.1.1· The difference between microeconomics and macroeconomics
Some of the Differences Between Micro- and Macroeconomics
| Microeconomics | Macroeconomics |
|---|---|
| Single market e.g. milk | Entire economy e.g. singapore |
| Price of a good/service | Average price levels in an economy (inflation/deflation) |
| Individual/market demand | Total demand in an economy |
| Individual firm/market supply | Total supply in an economy |
| Government intervention in a market e.g. cigarettes | Government intervention in the economy e.g. income tax |
| Reasons for differences in workers wages | Unemployment and minimum wages |
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Microeconomics is the study of individual markets and sections of the economy, rather than the economy as a whole
- It examines the different choices individuals, households and firms
- It examines what factors influence their choices
- It examines how their decisions affect the price, demand and supply of goods/services in a market
- It examines how Governments influence consumption and production
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Macroeconomics is the study of economic behaviour and decision making in the entire economy, rather than just an individual market
- It examines the role of the government in achieving economic growth and human development through the implementation of specific government policies (fiscal, monetary and supply-side)
- It examines the role of the government in achieving price stability, low unemployment and a stable Current Account balance on the Balance of Payments account
- It examines the interaction of the economy with the rest of the world through international trade
Decision Makers in Micro and Macro
Spec point —
2.1.1· The decision makers involved in each.
Decision Makers and Their Choices in Microeconomics
| Decision Maker | Choices They Make |
|---|---|
| Consumers | - Which combination of goods/services do they value the most? - How to respond to changes in markets they consume in - How much money to save, spend or borrow |
| Firms | - Which combination of goods or services to supply - How to best produce goods/services in order to meet their objective (usually profit maximisation) - How to respond to changing market conditions |
| Government | - Which policies will be most effective in addressing specific market failures? - Which industries/markets are essential and require government support? |
Decision Makers and Their Choices in Macroeconomics
| Decision Maker | Choices They Make |
|---|---|
| Consumers | - How to best respond to changing macroeconomic conditions, such as recessions or interest rate rises |
| Firms | - How to best respond to changing macroeconomic conditions, such as recessions, interest rate rises or a low supply of labour - Whether to sell their goods/services locally, nationally or internationally |
| Government | - Determining the best combination of policies that will help them meet all of their macroeconomic aims |
| Multinational corporations (MNCs) | - Which countries to invest in - How to best develop international advantages - How to engage with the government and local workforce in a way that maximises profit without harming the brand image |
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