Two branches of Economics: Macroeconomics and Microeconomics

There are two approaches to studying economics, or two branches of economics. They are Macroeconomics and Microeconomics. Both approaches are closely related and intertwined. Let me explain in detail-

Macroeconomics

Macroeconomics is the study of a country's or the world's economy as a whole unit. It mainly concentrates on government policies, dealing with the allocation of scarce resources to achieve maximum production and development in the economy. 

It deals with the country's available resources, demand trends of its population, available technology and infrastructure, manpower, and brainpower. It studies available options in achieving targeted goals, etc. It tries to propose policies and decisions to improve the economy, based on surveys and assumptions or conclusions drawn from these studies.

For example, take the power sector in India. Power is generated either by using coal or water. Coal is becoming exhausted due to the long-term draining of coal fields. Now the reserves are found at very deep levels of coalfields, and mining them is becoming a very tedious job. 

As a result, coal prices have increased enormously, and power generation costs have also become very high. In hydel power, we are facing the same problems. Water sources are drying up. The construction of dams has also become problematic, as people living in those areas are strongly opposing the projects as they are afraid of losing their livelihoods and homes. The government has to tackle these issues patiently and prudently. So all these matters are to be studied with great analysis and research to arrive at decisions.

Their research has led to the utilisation of alternative sources of generating power like solar power. But solar power generation involves too much investment, and its cost of production is also very high at present.

Macroeconomics deals with all such problems. It studies all issues very closely and carefully, and advises the governing bodies on the best possible solutions.

Microeconomics

Now, coming to microeconomics, it mainly deals with the study of individuals, or firms, or companies in their reactions and habits under particular economic circumstances. 

Microeconomics observes people and societies and studies their actions in pursuing their wants among various available options to tally with their limited resources. It studies how a person under a particular level of income reacts to certain changes in products and supplies, or to changes in prices. or in their income levels. 

It observes how he adjusts his wants by satisfying only certain needs and suppressing the others. In other words, microeconomics studies which needs he gives more preference by leaving behind the other needs for a later time. 

It also observes the degree of preference or the order of preference in which he satisfies his needs. If he gives more or most preference to particular wants, why is he giving that much degree of preference to that want over all others, and which want he will satisfy next to it and so on. All these things are studied very minutely to understand consumer behaviour.

Microeconomics formulates some conclusions and laws according to this behaviour of individuals. 

It sets assumptions and predictions that at such and such a level of income people will act like this, and they will react to some changes in prices or supplies in such and such a manner. 

These predictions will guide the marketing people in selling their products or manufacturing them according to the tastes and preferences of consumers.

In a nutshell

• Economics, with the application of both these microeconomic and macroeconomic approaches, tries to solve all economic problems for improving the overall economy of the people.
• It acts as an important tool in dealing with consumer behaviour and marketing behaviour. 
• It helps in setting standards and guidelines for governments and markets in dealing with the problems of scarce resources and increasing demands. 
• It tries to bridge the gap between production and demand and maintain a level of equilibrium as far as possible.