Macro and micro-economics

Macro-Economics and Micro-Economics

Macroeconomics is interesting because it deals with the bigger issues. For analysis purposes it reduces complicated details of the economy to manageable essentials - the aggregated goods, labour, and asset markets of the economy.

To do this one has to abstract from details of the behaviour of individual economic units, such as households and firms, and the determination of prices in particular markets, or the effects of quantities and prices and the behaviour of firms such as in a monopoly in individual markets - the subject matter of microeconomics.

In macroeconomics we deal with the aggregated market for goods and services as a whole, treating all the markets for different goods and services-such as the market for transport or labour-as a single market. The price in accuracy of such abstraction is that omitted details do matter. However the benefit of the abstraction is an increased understanding of the possible combined effects and interactions among the goods, labour, and assets markets.

Despite the contrast between macroeconomics and microeconomics, there should be no conflict between the different levels of abstraction apart from a difference in emphasis.

There is however the "fallacy of composition..."