Economics tends to be broken into two schools of study. When analyzing a firm, microeconomic issues tend to be those that involve the problems and constraints that arise internally. Macroeconomic issues are those that arise outside the firm and are not necessarily a result of the actions and decisions made by managers.
Microeconomics concentrates on areas such as costs, prices, quantities, industrial structure and markets, and how they are influenced by the laws of demand and supply. Demand and supply tends to be applied on an individual- and firm-level basis rather than an aggregate. Issues that arise in microeconomics and are studied are those such as firm efficiency and consumer choice, behavior and constraints. Microeconomists often work in areas such as environmental economics, public economics, micro-level development economics, finance, business and health economics.
When analyzing industries on the micro-level, analysts tend to address topics that influence a firm's growth, profits, costs and market entry. Therefore, economically viable business models that address a firm's resource constraints are put forward. Such constraints may include the level of financial investment available, an adequate customer base, supplier frameworks and any issue that has influence on a firm's short- and long-run revenue and costs. On the micro-level, therefore, decision-makers are more concerned about maximizing revenue while minimizing costs.
Macroeconomics is more focused on the issues that reflect an economy as a whole, rather than those of the individual and firm. Thus, topics such as employment rates, exchange rates, interest rates, business cycles and inflation are addressed. A demand-and-supply framework is used, but on an aggregate level, which adds up the supply-and demand-constraints of individuals and firms. Macroeconomics tend to work in areas such as trade economics, labor economics, macro-level development issues, central banking, fiscal policy and monetary policy.
Any decision made on the macro-level includes those that do not address management structures and product management, which are made on the micro-level. Macro-level problems are more concerned about exterior forces and the problems associated with them. Such forces may include the ability for customers to pay for products, which in turn is affected by average incomes. New technology, which brings substitutes to a firm's product, are also addressed. Global forces, such as the entry of foreign firms, concern many domestic industries. The prices of supplies, which in turn is affected by the prices of natural resources, will also have an effect on a firm's pricing and production decisions.
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