In modern economics the subject matter of economics has been divided into two parts. The two branches are microeconomics and macroeconomics. These terms were first introduced by Ragnar Frisch and have now been adopted by the economist all the world over.
Microeconomics deals
with specific economic units and a detailed consideration of these individual
units. At this level of analysis, the economist figuratively puts an economic
unit under the microscope to observe details of its operation. It talks in
terms of an individual firm, or household, and concentrate upon such magnitudes
as the output or price of a specific product, the workers employed by a single
firm etc. Microeconomics is useful in achieving a worm’s-eye view of some very
specific component of our economic system.
Macroeconomics deals
either with the economy as a whole or with the basic subdivisions or aggregates
such as government, household and business sectors which make up the economy.
It is concerned with obtaining a general outline of the structure of the
economy and the relationships among the major aggregates. It speaks of such
magnitudes as total output, total level of employment, total income, aggregate
expenditures, the general level of price and so forth. Macroeconomics gives a
bird’s-eye view of the economy.