Introduction
Economic relations are an essential part of human life and have a significant impact on both entire states and individuals. It is impossible to abstract from interaction with other subjects or isolate from them. For several centuries, the circle of these relations has been closely studied to identify patterns and corresponding trends. The division of economic theory into micro- and macroeconomics has made it possible to answer various questions facing humanity and helps address the distinctive functions of the actors involved at different levels.
Definitions
Macroeconomics
Macroeconomics is a branch of economic theory that analyzes the interaction of systems, as well as the economy as a whole. All features are assessed in aggregate and are not divided into initial elements. The range of issues studied includes employment, economic growth and equilibrium, pricing and pricing policy, and trade balance. The founder of the direction is John Keynes, the English scientist who once led the United States out of the Great Depression (Palley, 2021). In general, macroeconomics reviews the principles of achieving sustainable economic growth, reducing the level of inflationary processes, full employment of resources, as well as the equilibrium of the balance of payments.
Microeconomics
Microeconomics is a science that studies the work of economic agents: households, firms, and states, as well as their interaction in the course of economic activity. The analysis is carried out at the level of specific subjects, which allows for solving the problems facing a specific legal entity or individual. The key issues that are studied by microeconomics are the problem of the consumer and the producer, market equilibrium, economic efficiency, and some others (Palley, 2021). The microeconomic analysis is based on the system of market pricing, which is typical for the markets of individual goods, as well as the issue of the partial equilibrium state of markets.
Main Distinctions
Understanding the considered sections of economic theory is best manifested in practice. According to Lee et al. (2017), unlike microeconomics, macroeconomics does not investigate the issues of the activity and existence of individual markets and the peculiarities of pricing under perfect and imperfect competition. Microeconomic analysis takes the motivation and explanation of the behavior of an individual buyer or seller beyond the scope of assessment. It also abstracts from the difference between individual markets and the discovery of the main options for the functioning of an integral economic system. As a result, the mechanism of the relationship between supply and demand is the subject of the study of macroeconomics.
Macroeconomic analysis, in turn, uses aggregates, such as gross domestic product, rather than individual measures, such as demand or utility. As Lee et al. (2017) note, this economic strategy also considers household decisions as independent and takes into account resource and commodity interactions. The specific financial base is assessed, which is designed to ensure national interests and needs, for instance, the existence of a social and industrial nationwide infrastructure or the organization of collective consumption of public goods. Thus, in simpler terms, microeconomics considers the internal structure of the economic base, and macroeconomics reviews the external one.
Relevance to Business Operations and Entrepreneurship
When talking about the relevance of the two concepts under consideration to the business environment, microeconomic approaches are more focused on the entrepreneurial sector. This type of analysis is based more on individual assessment because it concerns businesses and households and analyzes the behavior of consumers, as well as the allocation of resources, including human ones (Lee et al., 2017). Macroeconomic theory, in turn, allows control over the conduct of business and provides an incentive to evaluate potential interventions that could affect business operations on a larger scale. For instance, according to Balven et al. (2018), when planning to introduce technological innovations and upgrade existing infrastructure, entrepreneurs should be guided by macroeconomic variables to implement rational transformations, taking into account existing motivations and constraints. Therefore, the same as in the standard understanding of the two concepts, narrowly focused business solutions are correlated with macroeconomic analysis, while larger changes require an assessment of macroeconomic trends.
The connection between microeconomics and macroeconomics is that they are invariably dependent on each other. Microeconomic variables depend heavily on macroeconomic ones, and similarly, macroeconomics depends on microeconomic variables (Palley, 2021). For instance, the income of a business entity (microeconomic variable) in the economy is largely national income (macroeconomic variable). On the other hand, the general level of inflation (macroeconomic variable) also affects the purchasing power of the subject (microeconomic variable), which allows for talking about the relationship between the concepts under consideration.
Conclusion
The division of economic theory into micro- and macroeconomics makes it possible to assess the role and capabilities of various actors at the local and global levels and contributes to searching for answers to pressing questions. The scope of the analysis is a key factor that determines the differences between the concepts under consideration. Microeconomics and macroeconomics are relevant to the business sector, and they also determine the nature of interventions by evaluating the level of transformations (local or global).
References
Balven, R., Fenters, V., Siegel, D. S., & Waldman, D. (2018). Academic entrepreneurship: The roles of identity, motivation, championing, education, work-life balance, and organizational justice. Academy of Management Perspectives, 32(1), 21-42. Web.
Lee, J., Ihm, J., & Ryu, D. (2017). Human capital measures and stock return predictability: Macroeconomic versus microeconomic approaches. Finance Research Letters, 21, 53-56. Web.
Palley, T. (2021). The economics of new developmentalism: A critical assessment. Investigación Económica, 80(317), 3-33. Web.