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Short Essay on Microeconomics (314 Words)

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Here is your short essay on Microeconomics !

Microeconomics is the study of individual economic units of the economy whereas macroeconomics is the study of economy as a whole and its aggregates.

Again, it would be useful to know that there are two main schools of economic thought—Classical School and Keynesian School .According to Classical School, (i) An economy as a whole always functions at level of full employment due to free play of market forces in a free economy and that (ii) Supply creates its own demand. Till early 1930s Classical doctrine of automatic full employment was largely accepted. But the Great Depression of early 1930s (1929-33) exploded the myth that automatic working of market mechanism would ensure equilibrium level of income consistent with full employment of resources.

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Although USA and other Western countries were highly industrialised with well developed basic industries, electric power, means of transport and communication, banks and other financial institutions, yet there was persistent fall in the level of output, income and employment. The Classical could not explain this phenomenon during world-wide depression.

It was against this background that the well-known British economist J.M. Keynes propounded his own theory and wrote his famous book “General Theory of Employment, Interest and Money,” published in 1936 which brought about a revolution in economic thought called the Keynesian Revolution.

Keynes criticised the Classical assumption of full employment and developed a new theory known as Macroeconomic Theory. Thus, during Great Depression of 1929-33, strong desire to control business cycles in advanced economies and to develop backward economies are the main factors which have contributed to the development of modern macroeconomics.

In recent years, the subject matter of Economics has been made to fall in two main branches, namely Microeconomics and Macroeconomics. Even the current syllabus of economics for class XII has been bifurcated accordingly in two parts—A and B—titled ‘Introductory Microeconomics’ and ‘Introductory Macroeconomics’.

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