The term microeconomics is derived from the Greek word mikros, meaning “small” and the term macroeconomics is derived from the Greek word makros, meaning “large.”

The microeconomics studies the economic actions and behaviour of individual units and small groups of individual units. In microeconomic theory we discuss how the various cells of economic organism, that is, the various units of the economy such as thousands of consumers, thousands of producers or firms, thousands of workers and resource suppliers in the economy do their economic activities and reach their equilibrium states.

word macro is derived from the Greek word ‘makros’ meaning ‘large’ and therefore macroeconomics is concerned with the economic activity in the large. Macroeconomics analyses the behaviour of the whole economic system in totality or entirety. In other words, macroeconomics studies the behaviour of the large aggregates such as total employment, the national product or income, the general price level of the economy.

Therefore, macroeconomics is also known as aggregative economics. Mac­roeconomics analyses and establishes the functional relationship between these large aggregates.