The Major Differences between Micro and Macroeconomics are mentioned below:
1. The word ‘Micro’ means small. It is a study of individuals or groups. According to Shapiro “Microeconomics deals with small parts of the economy.” It is a piece meal study. On the other hand, ‘Macro’ means large. It is a study of economy as a whole.
2. Microeconomics is a study of particular households, particular firms, particular industries, particular commodities, particular prices etc. On the other hand, Macroeconomics deals with aggregate of these quantities, not with individual incomes but with the national income, not with individual prices but with the price level, not with individual output but with the national output.
3. The objective of microeconomics is to maximise utility or maximisation of profit or minimisation of cost. But the objectives of macroeconomics are full employment, price stability, economic growth, favourable balance of payments etc.
4. The basis of microeconomics is the price mechanism which operates with the help of demand and supply forces. These forces help to determine the equilibrium price in the market.
On the other hand, the bases of macroeconomics are the national income, output, employment and the general price level which are determined by aggregate demand and aggregate supply.
5. Microeconomics is based on the assumption of ‘ceteris paribus’ (It means other things remaining constant) to explain the various laws. It means microeconomics uses the technique of partial equilibrium analysis which explains the equilibrium conditions of an individual, a firm or an industry.
But macroeconomics uses the technique of general equilibrium analysis that studies aggregate economic variables and their interrelations.
6. Microeconomics is a static analysis while macroeconomics is a dynamic analysis. Microeconomics does not take into account the time element while macroeconomics is based on time-lags, the rates of change and past and expected values of the variables.
7. The variables of microeconomics are taken as given (or constant) in macroeconomics and the variables of macroeconomics are taken as given in microeconomics.
Microeconomics assumes full employment, optimum allocation of total resources and general price level as given. But macroeconomics assumes a situation of less than full employment. It studies under employment. It takes general price level as variable and assumes price of a particular product or factor as given.
8. Microeconomic problems are many. It possesses maximum generality and applicability to a wide range of situations. But macroeconomics seeks practical understanding of an economy. So macroeconomic problems are relatively few and so are their specific solutions.
9. Under micro study the main problem is of price determination. But under macro study the main problem is income determination.
10. Micro study is based on the objective of optimum allocation of resources while macro study is based on the objective of full employment of total resources.
The difference between micro and macroeconomics is a difference of degree and not of kind.