The distinction between macro and micro economics is the most usual classification of economic analysis.
Object of Study
A primary difference between macroeconomics and microeconomics is the object of study:
- Microeconomics focuses on the study of individual economic units and particular markets, like the market of ice cream or why an increase in the price of a product can lead to a lower consumption of that particular product.
- Macroeconomics studies economic aggregates, like GDP, unemployment, inflation and economic growth.
Variables are elements of economic models. Variables can be a characteristic of an economic agent, a number or quantity.
- Microeconomics: in microeconomic models, the variables are usually individual, like the production of a business.
- Macroeconomics: in macroeconomic models, the variables are aggregates. For example, the GDP is the sum of the production of every economic unit inside a country.
Relation between micro and macro
Microeconomics can study how macroeconomic changes can affect the behavior of microeconomic units. For example, how an increase in inflation or a change in the real exchange rate can affect the production of cars in the city of Detroit.
Who studies what?
Business administrators tend to focus on microeconomics and place less focus on macroeconomics.
Economists and public policy makers focus on both macro and micro. Economist tend to specialize either on microeconomics or on macroeconomics.
There are some economic fields that are dominated by microeconomics, while the application of macroeconomics is more usual in other fields. For example:
Microeconomics has more applications in: labor economics, regulation economics, industrial organization, urban economics, development economics, environmental economics,
Macroeconomics has more applications in: international economics, public finance, study of particular economic regions (for example: Economy of Latin America)