Subject Matter of Economics

The subject matter of economics is presently divided into two major branches.  
                                         
1)Micro economics
2)Macro Economics
These terms have now become of general use in economics.

Micro Economics

• Micro economics studies the economic behaviour of individual economic units.
                 
• It examines whether resources are efficiently allocated and spells out the conditions for the optimal allocation of resources so as to maximize the output and social welfare.

• For example, micro economics is concerned with how the individual consumer distributes his income among various products and services so as to maximize utility.

Macro Economics

• Macro economics deals with the functioning of the economy as a whole.

•It deals with the broad economic issues, such as full employment or underemployment , capacity or
under capacity production, a low or high rate of growth, inflation or deflation.

• For example, macro economics seeks to explain how the economy’s total output of goods and services and total employment of resources are determined and what explains the fluctuation in
the level of output and employment.

Interdependence between Micro Economics and Macro Economics

• Micro Economic analysis and Macro Economic analysis are complementary to each other.

• They do not complement but supplement each other.

• The basic goal of both the theories is same: the maximization of the material welfare of the nation.

• From the micro economic point of view, the nation’s material welfare will be maximized by achieving optimal allocation of resources.

• The study of both is equally vital so as to have full knowledge of the subject-matter of economics.