Micro and Macro Economics Overview

Introduction

• Micro and macro economics are the two main branches of modern economics
• "Micro" comes from the Greek word "Mikros" meaning small
• "Macro" comes from the Greek word "Makros" meaning large
• The terms were coined by Ragnar Frisch in 1933

History of Microeconomics

• Microeconomics is traditional and was developed first
• Ancient roots are in the work of Classical Economists such as Adam Smith, David Ricardo, J.S. Mill
• Popularized by Alfred Marshall in his book "Principles of Economics" published in 1890

History of Macroeconomics

• Macroeconomics existed before Microeconomics
• Advocated by Mercantilists in the 16th and 17th centuries
• Physiocrats in the 18th century analyzed national income
• Classical economists also considered national income
• Macro analysis remained combined with micro analysis until the Great Depression
• Keynes' "General Theory of Employment, Interest, and Money" (1936) promoted macroeconomics
• Keynes, Malthus, Wicksell, Walras, and Irving Fisher contributed to macroeconomics

Meaning of Microeconomics

• "Micro" refers to a small part of something
• Studies the economic actions of individual units, such as consumers, producers, a single commodity, or a factor

Definitions of Microeconomics

• Maurice Dobb: “Micro economics is in fact a microscopic study of the economy.”
• A.P. Lerner: “Micro economics consists of looking at the economy through a microscope, as it were, to see how the millions of cells in the body of economy - the individuals or households as consumers and individuals or firms as producers play their part in the working of the whole economic organism.”

Scope of Microeconomics

• Theory of Product Pricing: The price of a single good is determined by demand and supply forces
• Theory of Factor Pricing: Microeconomics determines the rewards for factors of production (land, labor, capital, entrepreneurship)
• Theory of Economic Welfare: Deals with efficiency in resource allocation, resulting in maximized satisfaction
  • Efficiency in production
  • Efficiency in consumption
  • Overall economic efficiency

Explore the fundamental concepts of micro and macroeconomics, their historical development, and the influential economists who shaped these fields. This quiz highlights key figures and pivotal works in economics, making it ideal for students seeking a deeper understanding of economic principles.