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The term economics is divided under two broad categories
 
1. Microeconomics which is called price theory.
2. Macroeconomics which is called income theory.
These two above terms are generally used in economics and very important term in any economy.
 

Microeconomics

 
Adam smith is called the father of economics as he is the founder of microeconomics. The term micro comes from Greek word ‘mikros’ which means small. Microeconomics studies the individual people savings and economic activities of small persons and firms of the country economy like customer, firm or a small group of persons. The subject matter of microeconomics is treated as very important function because it provides base for understanding the working of the country economy so that further process of economics can be carried out.Microeconomics analysis the working of individual people and units of the country. For example individual income, price of goods, income of small group of person etc. Its main components are demand and supply.
 

Micro V/s Macro

 
• In Microeconomics individuals are denoted by letter ‘I’ which studies the economic activity of individual people.
 
• In macroeconomics Aggregates are denoted by letter ‘A’ which studies economic activity of whole country.
Relationship between Microeconomics and Macroeconomics
Since economics is a single term so it can not be divided in to two different units so we can say that both the term are different from each other and they are not internally dependent to each other but there is some common base for which macroeconomic takes the help of microeconomic as a result we can say that both are internally dependent to each other.
 

Microeconomics Depends on Macroeconomics

 
 Law of demand comes arises from the study of the economic activity and total income of individual people.
 Price of a goods is affected by the general price level currently goes in the economy.
Macroeconomics depends on Microeconomics
 National income of the country means the sum of total incomes of individual people of the country.
 Total demand depends on demand of individual people and households activity of an economy
 .

Micro-Macro Paradoxes

 
Paradoxes means difficult to understand.Sometimes there are paradoxes found in both micro and macro economy because some act which is beneficial for any individual people may be harmful for the whole economy of the country.
Example: If an individual starts saving then it is beneficial for him and his family but if the whole economy starts saving then it results in fall in demand and whole economy can suffer for such fall in demand.
 
Which is more Important- Microeconomics or Macroeconomics?
 
Both microeconomics and macroeconomics are important and their unique place in the economy so both the term cannot be ignored. Microeconomics helps in the analysis of individual components and macroeconomics analysis the whole economy of the country. Microeconomics studies the individual income and macroeconomics studies the income of the whole economy so both the approaches are important and no term can be ignored. Both the approaches are important in their field.
 

Need for a separate Theory of Macroeconomics

 
Since microeconomics can not study the total income of the whole economy so there is need for a separate theory so that it can explain the working of economy. Macroeconomics helps to understand the working of economic system as well as also explain the various macroeconomic paradoxes.
 

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