Question

Do you agree with following statements? Give reasons.
The concept of aggregation in Micro economics is different from that of aggregation in Macro economics.

Answer 1

Yes, I do agree with this statement.
(a) Micro economics uses aggregates but not in context which relates them to an economy-wide total.
(b) E.g. in micro economics we examine the behaviour of the industry with regard to the determination of product price, output, employment. An industry is an aggregate of various firms producing similar product.
(c) Similarly market demand for a product is the aggregate of individual demand of all consumers wishing to buy the product.
(d) Micro economics examines aggregate relating to a particular product, particular industry or particular market.
(e) But in Macro economics the sub-aggregates add up to an aggregate for the whole economy.
(f) E.g. total consumption, total investment are two sub aggregates, which together constitute the total National Product.
So the aggregation in Micro economics is different from aggregation in Macro economics.