Understanding of Economy

Understanding of Economy

The word economy comes from the Greek "Oikos" which means household and "Nomos" which means "rule".

So, it can be said if the economy is a household rule.

Households in the economy cover a broad sense, namely every form of cooperation of an individual to achieve prosperity on the basis of economic principles.

Examples: consumer households, producer households, and government households.

Well, these three households are referred to as economic agents.

Economic Principles

Definition: principles or basic thinking used by humans in carrying out economic activities.

These principles include:

With certain sacrifices so as to get maximum satisfaction.

With the smallest sacrifice in order to obtain certain satisfaction.

Economic Action

Definition: all the actions of an individual with a view to meeting his life needs. And they adhere to the economic principle which always lives frugally and sets priorities.

There are three main actions in economic activities, including:

Production activities

Consumption activities

Distribution activities.

Understanding of Macro and Micro Economics

Following understanding of macroeconomics and understanding of microeconomics, namely:

Macroeconomics is a branch of economics that studies about overall economic activity.

Meanwhile, microeconomics is a branch of economics that studies about economic activity in only a small part (not as a whole).

So, from the two meanings above, Macroeconomics and Microeconomics can be called as part of theoretical economics whose task is to explain various economic events and then formulate their relationship into economic law.

Get to know Macro and Micro Economics

In the scope of discussion, economics has two different perspectives, namely microeconomics and macroeconomics.

Both microeconomic and macroeconomic theories are clearly not the same. Because these two things have many differences in the aspects of analysis, the situation to its application.

Before further discussion, let's first identify which activities are included micro and macro.

Here is an example:

Consumption or individual households (households where they are now) are microeconomics.

Production households (companies) are microeconomics.

Country households (very broad in scope) are macroeconomic.

Differences in Micro and Macro Economics

There is an illustration, right? What is microeconomics and what is macroeconomics?

Now, to make it easier for you to understand the characteristics of both, here are some differences from micro and macro economics.

Price and Commodity Value of Goods

Understanding commodity: a real object (physical) that is easily traded or can be exchanged for similar products that can usually be bought or sold by investors through the futures exchange.

In short, commodities are products that are traded and the characteristics of their prices are determined by the demand and also the market supply.

So, the commodity is the same as the product.

Here's the case in micro and macro economics:

In microeconomics, price is the value of a particular commodity or item. For example: coffee prices, sugar prices, computer prices, skincare prices.

in a macroeconomic, prices are the value of a commodity as a whole or in the aggregate. Example: the consumer price index (CPI) as an aggregate of prices and services in a country.

Unit of Analysis and What are the Scopes

Understanding the unit of analysis: what limits are analyzed as well as being studied in the study and practice.

So, if you know the limits of analysis from macro and micro economics, then you will be easy to distinguish.

Here's the case in micro and macro economics:

In microeconomics: analyzing and discussing economic activities individually. The purpose of individuals here is that you can act as consumption households and companies as production households. Example: demand and supply, market, costs and profit or loss from a company.

In macroeconomics: analyzing as well as discussing the overall economic aggregate in a country. Example: national income, inflation, deflation, investment, and economic growth.

The Purpose of Micro and Macroeconomic Analysis

The purpose of the analysis of micro and macroeconomic theories is very different.

The purpose of the two, of course, is already seen in what units of analysis are studied.

In microeconomics: the focus of the purpose of the analysis is centered on how to allocate the available resources so that they can achieve the right combination, the lowest possible expenditure and the highest income.

In macroeconomics: the focus of the objectives of the analysis is centered on the influence of economic activities carried out, on the economy that occurs as a whole

Reference :

https://www.yuksinau.id/ekonomi-mikro-dan-makro/