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Difference between Micro and Macroeconomics

Barnier (2020), describes Microeconomics as "the social science that studies the implications of incentives and decisions, specifically about how those affect the utilization and distribution of resources." Microeconomics is involved in agents in their individuality such as workers, businesses, and households in the economy (OpenStax College 2016). It explains how different goods are and why they differ in their values. Also, it shows the benefits gained by businesses and workers from efficient production and the cooperation between the two. On the other hand, Macroeconomics, according to the Economic Times (2020), is "the branch of economics that studies the behavior and performance of an economy as a whole". It is more concerned with government deficits, unemployment, gross domestic product, and inflation and the inflationary increase in prices (OpenStax College 2016). Microeconomics gives a more precise, detailed, and complete understanding of the economy whereas Macroeconomics provides an analysis of all factors and indicators that influence the economy. An example of a microeconomic phenomenon is understanding how the law of supply and demand work in an economy. An example of a macroeconomics phenomenon is understanding how national income and the gross domestic product is calculated.

Recent article Link: https://www.investopedia.com/ask/answers/difference-between-microeconomics-andmacroeconomics/

The article gives an overview of Micro and Macroeconomics with vivid explanations. It explains how Microeconomics takes a bottom-up approach and studies business and individual decisions while Macroeconomics takes a top-down and analyzes the decisions made by governments and countries. I found the article interesting because it provides the role of investors in Micro and Macroeconomics. It shows how investors make investment decisions based on Microeconomics but Macroeconomics forecasts do not influence their investment decisions. Sunk cost and marginal cost According to Fiorillo (2018), Sunk cost is "a cost that has already been paid for and cannot be recovered in any way”. For instance, when a studio buys music gear, they may need to upgrade their gear as time goes by. They may have to sell their old gear to buy the new one but not for the amount they had bought it for. The cost that cannot be recovered is the sunk cost. Marginal cost, however, is “the additional cost of producing one more unit of output” (OpenStax College 2016). Marginal cost is relevant for decision making while the sunk cost is not.

I once was making a pair of beaded bracelets for a client. Each bracelet required a maximum of 12 beads to be complete. The beads were sold in packs of 10. I already had two packs. I, therefore, had to incur the cost of buying an extra pack of beads to make complete and decent bracelets. The returns of selling bracelets covered the marginal cost and made a profit.

References Barnier B., (2020). Microeconomics. Investopedia. https://www.investopedia.com/terms/m/microeconomics.asp Fiorillo S., (2018). Sunk Cost: Definition, Examples, and Fallacy. https://www.thestreet.com/personal-finance/education/sunk-cost-14767636 OpenStax College. (2016). Principles of economics. http://cnx.org/contents/[email protected] The Economic Times. (2020). Definition of Microeconomics.https://economictimes.indiatimes.com/definition/macroeconomics Investopedia Staff. (2020). Microeconomics vs. Macroeconomics: What's the Difference? https://www.investopedia.com/ask/answers/difference-between-microeconomics-andmacroeconomics/...