Macroeconomics: Microeconomics Foundation
  1. Macroeconomics: Introduction and History
  2. Macroeconomics: Schools Of Thought
  3. Macroeconomics: Microeconomics Foundation
  4. Macroeconomics: Supply, Demand and Elasticity
  5. Macroeconomics: Money And Banking
  6. Macroeconomics: Economic Systems
  7. Macroeconomics: Inflation
  8. Macroeconomics: The Business Cycle
  9. Macroeconomics: Unemployment
  10. Macroeconomics: Economic Performance and Growth
  11. Macroeconomics: Government - Expenditures, Taxes and Debt
  12. Macroeconomics: International Trade
  13. Macroeconomics: Currency
  14. Macroeconomics: Conclusion

Macroeconomics: Microeconomics Foundation

By Stephen Simpson

While there are relatively clear definitions separating microeconomics and macroeconomics, the reality is that both sections of economics draw heavily from certain shared underlying concepts. Both are underpinned by the reality that there are unlimited wants and only limited resources to meet them.

Economics holds that maximizing welfare is a key goal in all economic pursuits. Welfare can be broadly defined as the maximum enjoyment of resources for the minimum output of effort (work, labor or capital). Welfare is measured in part by consumer and producer surpluses – consumer surplus is calculated as the difference between the price a consumer is willing to pay and the actual price, while the producer surplus is the difference between the sales price and the price the producer would have accepted.

Scarcity and choice are primary factors in macroeconomics. Scarcity does not mean the same thing as "shortage"; scarcity means that a good or service is in demand with a limited amount of resources - there is excess demand at a price of "zero" and therefore the equilibrium price is always above zero. (For related reading, see 5 Economic Concepts Consumers Need To Know.)

In comparison, a shortage is a situation where demand exceeds supply and there are impediments to the price rising enough to clear the excess demand – trucks to resupply a store may be late and the store is unwilling (or unable by law) to raise prices. In that case, there will be a temporary shortage of goods. Scarcity is a driving force in economics, as there is little trouble in allocating goods and services that are either limitless or valueless.

Marginalism is likewise a critical concept in macroeconomics. Marginalism refers both to the effect per unit of a small change in any variable, as well as the process of weighing only the costs and benefits that are directly related to a particular decision. For instance, it only makes sense for an economic agent to act when the marginal benefit is higher than the marginal cost.

Macroeconomics: Supply, Demand and Elasticity

  1. Macroeconomics: Introduction and History
  2. Macroeconomics: Schools Of Thought
  3. Macroeconomics: Microeconomics Foundation
  4. Macroeconomics: Supply, Demand and Elasticity
  5. Macroeconomics: Money And Banking
  6. Macroeconomics: Economic Systems
  7. Macroeconomics: Inflation
  8. Macroeconomics: The Business Cycle
  9. Macroeconomics: Unemployment
  10. Macroeconomics: Economic Performance and Growth
  11. Macroeconomics: Government - Expenditures, Taxes and Debt
  12. Macroeconomics: International Trade
  13. Macroeconomics: Currency
  14. Macroeconomics: Conclusion
RELATED TERMS
  1. Welfare Economics

    A branch of economics that focuses on the optimal allocation ...
  2. Surplus

    The amount of an asset or resource that exceeds the portion that ...
  3. Scarcity Principle

    An economic principle in which a limited supply of a good, coupled ...
  4. Macroeconomic Factor

    A factor that is pertinent to a broad economy at the regional ...
  5. Macroeconomics

    The field of economics that studies the behavior of the aggregate ...
  6. Consumer Surplus

    An economic measure of consumer satisfaction, which is calculated ...
RELATED FAQS
  1. Why are economists interested in the consumer surplus?

    Understand why an economist would be interested in consumer surplus. Learn why an economy would want to maximize consumer ... Read Answer >>
  2. Can scarcity and surplus coexist together?

    Can surplus and scarcity exist at the same time? Many examples of redistributing wealth and corporate welfare take advantage ... Read Answer >>
  3. How should you plan for scarcity when investing?

    Plan ahead for scarcity when you are investing so you can profit from emerging shortage trends and take advantage of prime ... Read Answer >>
  4. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Answer >>
  5. How do I differentiate between micro and macro economics?

    Differentiating between microeconomics and macroeconomics is primarily concerned with the difference of the scales of the ... Read Answer >>
  6. What is the difference between consumer surplus and economic surplus?

    Learn the difference between consumer surplus and economic surplus, how the concepts are related and the important theoretical ... Read Answer >>

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