Interdependence between microeconomic and macroeconomic

Actually micro and macroeconomics are interdependent. Partial equilibrium theory of interest which belongs to microeconomic theory would not reveal all the forces which take part in the determination of the rate of interest.

It is thus clear from above that the determination of profits and rate of interest cannot be explained without the tools and concepts of macroeconomics. For instance, the theory of investment, which is a part and parcel of the microeconomic theory, is derived from the behaviour of individual entrepreneur.

Interdependence between Micro and Macro Economics

When the firm employ labor what amount he should pay for the labor relates to a particular firm so it comes under microeconomics.

With the rise in the cost of production, the prices rise. On the one hand, microeconomic theory should provide the building blocks for our aggregate theories.

In practice, analysis of the economy is not done separately in two watertight compartments. But the wages of one firm are related to and depend upon wages of other firms in the locality.

Interdependence between Micro and Macroeconomics

The theories regarding the behaviour of some macroeconomic aggregates but not all are derived from theories of individual behaviour. But macroeconomics also contributes to microeconomic understanding.

So, they both are interdependent. Not only does macroeconomics depend upon to some extent on microeconomics. It then goes on to examine how the given volume of output and employment can be best allocated between various individual industries and firms within industries, and how prices of individual products are determined.

Moreover, we can derive the behaviour of these aggregates only if either the composition of aggregates is constant or the composition changes in some regular way as the size of aggregates changes.

On the one hand,micro-economics theory should provide the building blocks for our aggregates theories. It way the policy made for national or macroeconomics brings the change in those different sectors or micro studies.

But, these two approaches are not competitive but complementary to each other. Thus, change in macroeconomic indicators brings the change in microeconomic activities. Firm wise, individual wise, sector wise, district wise study of any economic activity is microeconomics.Thus, macroeconomic theory has a foundation in microeconomic theory and microeconomic theory has a foundation in macroeconomic theory.

In other words, there is an interdependence between the two.

In practice, analysis of the economy is not done separately in two watertight compartments. ADVERTISEMENTS: Actually micro and macroeconomics are interdependent. The theories regarding the behaviour of some macroeconomic aggregates (but not all) are derived from theories of individual behaviour.

For instance, the theory of investment, which is a part and parcel of the microeconomic theory, is derived from the behaviour. What is the interdependence of micro and macro economics?

Update Cancel. Originally Answered: How was the microeconomics, and macroeconomic interdependence to each other? Microeconomics is reality: it’s what people do, economically.

What is the difference between Micro economics and Macro. ADVERTISEMENTS: Interdependence between Micro and Macro Economics! Actually micro- and macro-economic are interdependent.

The theories regarding the behaviour of some macroeconomic aggregates (but not all) are derived from theories of individual behaviour. For instance, the theory of investment, which is a part and parcel of the microeconomic.

Interdependence of Microeconomics and Macroeconomics.

Interdependence of macroeconomics and microeconomics , Macroeconomics

We have seen that there is a distinction between micro and macroeconomics, but this does not imply that both are independent ways of analyzing the economic issues. Interdependence between Microeconomics and Macroeconomics Microeconomics BBA | BBA-BI | BBA-TT | BCIS Management Notes Macroeconomic theory has a foundation in microeconomic theory and micro economic theory has a foundation in macroeconomic theory.

Microeconomics and macroeconomics are just like the two .

Download
Interdependence between microeconomic and macroeconomic
Rated 4/5 based on 11 review