What is Microeconomics and Macroeconomics (and Normative and Positive economics)? - YouTube

Hey guys, this is Ankit on The Economic Hour today. Today, I will be telling you the concept of microeconomics and macroeconomics

positive and normative economics. So let get started.

Microeconomics is that part of economics in which we study individual units of the economy.

For example :

We may study about an individual a consumer, an individual company ,an individual industry or an individual market.

This helps different companies to allocate their scarce resources (which they cannot waste) in such a way which can give them maximum profits.

Microeconomics helps us to understand the way the market works.

It helps to determine the price of a commodity based on the supply and the demand of the product in the market.

Microeconomics helps us to find under which conditions the price of a commodity

increases and under which conditions the price of a commodity decreases and why only under those conditions the price of a commodity increases or decreases.

Microeconomics is also known as "Price Theory

Macroeconomics is that part of economics in which we study about the economy as a whole.

For example, we may study about the economy of Australia or the economy of Japan.

This branch of economics helps us understand the behavior of an economy.

For example, we may study that why the employment rate is low or high in an economy

And why is the GDP (the size of an economy) is high or lower for a country?

Or why is that the GDP of a country is large but still poverty levels are high in some countries?, etc.

Microeconomics helps us understand how an economy of a country or of the world behaves in different conditions?

Both microeconomics and macroeconomics are very important and no one can replace any one of them.

It is just we see economics from two different perspectives i.e. from an individual level in microecnomics to the whole economy in microeconomics.

We study about individual units of an economy which together form the whole economy and

we study the whole economy under macroeconomics.

What makes sense while studying microeconomics may not make sense while studying macroeconomics?

For example : If you start saving income, then it will benefit you or your family right now or in the future,

but, if all the people in a country started saving then it will be a huge loss for a country because if people started saving

then they will buy less of goods and services and if

the sale of goods and services is going to reduce then people will become unemployed,

and if people are going to get unemployed then poverty levels will rise, which is not good for a country.

Microeconomics and macroeconomics cannot be separated into two different subjects, but they also cannot be merged.

Now economic statements can be given with facts and figures or as opinions. For example : In

2015, India's GDP grew by 7.5 percent.

This is an economic statement which is supported by a fact.

But the statement I am going to give is not supported by a fact. If India's manufacturing sector grows,

then its economy will grow faster.

This is not supported by a fact but it is an opinion on what should be done

so that Indian economy should grow faster.

The statements which are supported by facts or figures come under positive economics and the statements which are opinions of economists

but are not supported by facts are known as normative economics.

Positive economics deals with how economic issues are

actually solved whereas normative economics deals with how economic issues should be solved.

Remember that statements under positive economics can be verified whether it is right or wrong.

Whereas it cannot be verified under normative economics.

Even if a statement with the fact is false then also it will come under positive economics.

It is our choice to verify a statement. And also statements under positive economics cannot be suggested whereas statements under

normative economics can be suggested because they are opinions of economists.

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