Microeconomics vs Macroeconomics

Microeconomics vs Macroeconomics

Copyright © 2005 by McGraw-Hill Ryerson Limited. All rights reserved.

Microeconomics focuses on decisions that individual consumers and businesses make and how they interact with each other

Macroeconomics takes a broad view of the economy and how different macroeconomic players (households, government and businesses) interact with each other and the impact on the country as a whole

Examples of Microeconomics

Individuals switching over to Apple products from Samsung products, causing Apple products prices to rise

Firms deciding to cut production of VHS tapes because it’s no longer generating money

Firms are increasing production of DVDsWatermelons have proven to cure many

diseases. Consumer demand for watermelons goes up

Examples of Microeconomics

Farmers in Ghana are producing more watermelons

A new company Acer is offering cheaper electronic products. Consumers are switching over to Acer from Apple products.

In reaction to Acer, Apple is increasing its marketing budget to gain back market share.

Everyone is demanding more gas. Price of gas goes up

Examples of Macroeconomics

The economy is doing well, consumer purchases have gone up 50%

Because consumer purchases have gone up 50%, firms are producing more, causing overall GDP to go up.

Because GDP has been going up, price levels of all products have been going up too. Inflation rate has risen by 0.2%.

Banks have decreased interest rates. Individuals are borrowing more, increasing their overall purchases

Government has increased tax rates. Individuals have less to spend, causing the overall consumption level to go down.

Examples of Macroeconomics

Because overall purchases have gone down. Firms are laying off staff. Unemployment rate goes up 10%.

Government established a new agreement with other countries, increasing Canada’s export. As a result, the Canadian GDP (a.k.a economic growth) increased by 5%