Adam Smith define economics as “ Economics is the study of wealth”
In the light of modern economic thoughts, the appropriate definition of economics can be given as under:-
“Economics is a science which studies the systems in which despite unlimited wants and limited means such combined efforts are made through economic planning guarantying maximum material welfare”.
Microeconomics is a Greek word which means small. Microeconomics is the study of specific individual units, particular firms, particular households, individual prices, wages, income. Individual industries, particular commodities. The microeconomics theory or price theory thus is the study of individual parts of the economy. It is economic theory in a microscope. for instance in microeconomic analysis we study the demand of an individual consumer for a good and from there we go to derive the market demand for a good that is demand of a group of individuals for a good. Similarly in microeconomic theory we study the behavior of individual firms in the fixation of prices and output.
IMPORTANCE OF MICROECONOMICS
1. Helpful in understanding the working of private enterprise economy.
2. Helps in knowing the conditions of efficiency.
3. Working of the economy without central control
4. Study of welfare economy
The term macro is derived from the Greek word “uakpo” which means large. Macro-economics the other half of economics is the study of the behavior of the economy as a whole in other words macroeconomics deals with total or big aggregates such as national income out and employment, total consumption saving and investment and the general level of price.
IMPORTANCE OF MACROECONOMICS
1. If helps in understanding the determination of income and employment.
2. Determination of general level of prices.
3. Economic growth
4. International trade
5. Income share from the national income.