In every area of human enterprise and endeavor, there’s a big
picture and a little picture, the macro and the micro. The
macro looks at things through a wide-angle lens; the micro
looks at things through a narrow-focus lens.
Macroeconomics studies large-scale phenomena in the national
economy, and even in global economies, because they’re
interrelated. These would include central bank interest rates,
national employment numbers, gross
national product figures, trade deficits or surpluses,
foreign currency exchange
rates, and other major economic activity and data.
By contrast, microeconomics studies a limited, smaller area of
economics, including the actions of individual consumers and
businesses, and the process by which both make their economic
decisions – buying, selling, the prices businesses charge for
their goods and services and how much of these goods and
services they produce and or offer.
Microeconomic study reveals how start-up businesses have determined
the competitively successful or unsuccessful pricing of their
goods and services based on consumer needs and choices, market
competition and other financial and economic formulas.
Microeconomics also studies supply-demand ratios and its effect
on consumer spending and business decision-making.
At the heart of consumer purchasing is the concept of utility, a classic economic idea.
Utility is the term applied to a consumer’s satisfaction after
the purchase of some product or service. Because a consumer’s
feeling of satisfaction may be impossible to precisely quantify
in actual numbers, the concept may seem impractical. But a
reasonably close approximation is useful to businesses, and may
also be useful to the individual consumer who can probably
measure that feeling of satisfaction with a “gut” reaction.
These concepts are explained in the following tutorial on
microeconomics. The information is both practical and
theoretical, and fascinating as well. It will provide the
reader with a big picture of small picture economics.