Microeconomics and macroeconomics Essay

Microeconomics is the branch of economics which deals into a more ‘individual’ scope of the study, such as the choices made by people in terms of the utilization and allocation of resources as well as the pricing of goods and services. In addition, it includes taxes and the policies created by governments. This field of economics deals with supply and demand together with other factors that acts as determinants in identifying the price levels for particular companies in specific industries. This is exemplified by how microeconomics focus on a specific company’s potential to maximize its production as well as its capability to lower its prices to better compete in the particular industry that it belong to (Investopedia, n. p. ). On the other hand, macroeconomics deals with the behavior of the economy as a whole. Unlike microeconomics, it does not focus on specific companies but rather takes into account entire industries and economies. This field of economics studies phenomena that take place in a wide scope of the economy like the effects of Gross National Product (GDP) with unemployment, national income, rate growth as well as price levels. A good example is how macroeconomics measures the effects of the rise and fall of net exports in a country’s capital account and also how the unemployment rate affects the status of the GDP (Investopedia, n. p. ). Nevertheless, even though these two fields of economic are different from each other, they are actually interdependent. This is due to the fact that most of the issues that fall under each field overlap and thus, they compliment each other. Basically, microeconomics has a bottoms-up approach while macroeconomics has a top-down approach. Nonetheless, they should be understood and analyzed in order to fully comprehend how the economy works (Investopedia, n. p. ). Distinguish between positive and normative economics. Positive economics is responsible in providing a system of generalizations, which could be used to make accurate predictions regarding the effects of any variation in circumstances. It is free of any ethical position or normative judgments. Keynes further elaborated on this idea by saying that it deals with â€Å"what is â€Å"and not with â€Å"what ought to be† (Economist’s View, n. p. ). Being the case, positive economics is or can be an objective science because it is judged according to precision, scope, and conformity as well as with empirical evidences. Positive economics deals with the interrelations of human beings with each other as well as with the economy (Economist’s View, n. p. ). Normative economics, on the other hand, is different from positive economics because it takes into account subjectivity in its analysis. It deals with â€Å"what ought to be† rather than what is really happening because it is heavily dependent in value judgments and theoretical scenarios. Normative economics tend to represent opinion instead of an objective perspective. Moreover, normative economics could be valuable in establishing goals and new ideas. However, it should not be the basis for policy decisions (Investopedia, n. p. ). References â€Å"Milton Friedman: The Methodology of Positive Economics. † 26 November 2006. Economist’s View. 19 July 2008. . â€Å"Normative Economics. † 2008. Investopedia. 19 July 2008. . â€Å"What’s the difference between macroeconomics and microeconomics? † 2008. Investopedia. 19 July 2008. .