Dependence of Microeconomic on Macroeconomics and Dependence Macroeconomics upon Microeconomics

 

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.

Dependence of Macroeconomic on Microeconomics

Macroeconomics  is the study of activity related to  aggregate such as national income, total output, general price level, etc. But this macroeconomics variables are the total sum of microeconomics variables therefore Macroeconomics is dependent upon Microeconomics the dependence of Macroeconomic on Microeconomics can be explained as follows:- 

(1):-Determination of national income-

National income is the subject matter of macroeconomics  but national income is calculated by the total sum of individual income. The study of individual income is the subject matter of microeconomic. Thus, Macroeconomics dependent upon Microeconomics 

(2):-Determination of price level-

The determination of price level is a subject matter of macroeconomics but it is the average of all prices of individual goods and services. Thus macroeconomic  is dependent upon microeconomics.

(3):-Determination of employment level-

The determination of employment level is for the studied under macroeconomics but to find out the level of employment in economy, The employment provided by each and every firm has to study of microeconomics necessary for the determination of employment.

(4):- Determination of investment-

Investment theory is the subject matter of macroeconomics but the investment is determined by the rate of interest expected rate of profit. The rate of interest and profit are studied under microeconomics. Thus, Macroeconomics is dependent upon Microeconomics.

(5):- Study of total saving income-

The total saving of any economy depends upon the saving of different sector, i.e, total saving is the sum of personal saving, business saving, and government saving, The saving in different sector of the economy is studied under the Microeconomics. Thus, Macroeconomics is dependent upon microeconomics.