Dependence of Microeconomic on Macroeconomics

Microeconomics is the study of individual part of the economy where macroeconomic is the study of economy as a whole but it is quite wrong to think that these two approaches are separate different and unconnected to each other approach is complete without the other through economist might emphasize one or the other of the analysis according to their convincence the two approaches are not competitive but complementary to each other.

strictly speaking there is only one 'economics'. The Macroeconomic theory has a foundation in Microeconomic theory and Microeconomic theory has  foundation is Macroeconomic theory-

                                   Edward Shapiro 

 

From the above opinion of Edward Shapiro. It is clear that micro and macro economics are interdependent with each other and one cannot exist is absence of another. The interdependence of micro and macroeconomic can be explained by the help of the following headings:-

Dependence of Microeconomic on Macroeconomics

Macroeconomics is the study of economic activity. Related to individuals such as the output of a firm, price of a commodity, individual demand or consumption, determination of Wages etc. But these microeconomics activity are dependent on macroeconomics the interdependence of microeconomics can be explained as follows:-

(1):- Determination of Consumption-

Is Consumption is the subject matter of microeconomic because it is an individual economic activity. consumption of an individual depend upon the consumption of goods and services by the society in a particular place. Hence microeconomic is depended on Macroeconomics.

(2):- Determination of product price:-

 

The determination of the price of a commodity depend upon the general price level in the economy. The determination of the General price level in the subject matter of macroeconomics Wheres the determination of individual price is the subject matter of microeconomics. Hence, microeconomics is dependent on upon macroeconomics.

(3):- Determination of Wages rate-

The determination of wage rate of labour is the subject matter of microeconomics. It is affected by the wage rate of all labour, of the economy has in the determination of the wage rate of labour, microeconomics is dependent upon Macroeconomics.

(4):- Determination of profit- 

The Determination of profit is studied under microeconomics. But it is dependent on microeconomic variable like employment level, aggregate demand, national income, General price level, etc. Hence, in the determination of profit microeconomic is dependent upon macroeconomics.

(5):- Determination of interest rate- 

Interest rate is the subject matter of microeconomics but it is determined by interaction between macroeconomic variables like demand for and supply of money. hence, microeconomics is dependent upon Macroeconomics.