Importance of Microeconomics
- It helps us understand the functioning of a complicated modern economic system. It describes how the economy as a whole functions and how the level of national income and employment is determined on the basis of aggregate demand and aggregate supply.
- It helps to achieve the goal of economic growth, a higher GDP level, and higher level of employment. It analyses the forces which determine economic growth of a country and explains how to reach the highest state of economic growth and sustain it.
- It helps to bring stability in price level and analyses fluctuations in business activities. It suggests policy measures to control inflation and deflation.
- It explains factors which determine balance of payments. At the same time, it identifies causes of deficit in balance of payments and suggests remedial measures.
- It helps to solve economic problems like poverty, unemployment, inflation, deflation etc., whose solution is possible at macro level only (in other words, at the level of the whole economy).
- With a detailed knowledge of the functioning of an economy at macro level, it has been possible to formulate correct economic policies and also coordinate international economic policies.
- Last but not least, macroeconomic theory has saved us from the dangers of application of microeconomic theory to the problems that require us to look at the economy as a whole.
