Cambridge IGCSE Economics 0455
Syllabus points
- Distinguish between microeconomics and macroeconomics.
- Give examples of microeconomic and macroeconomic decisions and issues.
Two levels of economics
Economics is studied at two levels:
- Microeconomics looks at *individual* parts of the economy — single consumers, workers, firms and markets. It asks questions such as: what determines the price of coffee? How does a firm decide its output?
- Macroeconomics looks at the *whole* economy — total output, employment, inflation, growth and government policy. It asks: why is unemployment rising? What causes inflation?
Micro = individual markets and decision-makers. Macro = the economy as a whole.
Key definitions
| Term | Definition |
|---|---|
| Microeconomics | The study of individual consumers, firms and markets. |
| Macroeconomics | The study of the economy as a whole. |
Examples
| Microeconomic issues | Macroeconomic issues |
|---|---|
| The price of a single good | The general price level (inflation) |
| One firm's costs and output | Total national output (GDP) |
| Wages in one industry | Overall unemployment |
| A tax on cigarettes | Government spending and taxation policy |
Worked example
A rise in the price of oil can be studied at both levels. At the micro level, it raises the cost of petrol and changes demand for large cars. At the macro level, higher energy costs can raise the general price level (inflation) and slow economic growth across the whole economy.
Common exam mistakes
- Labelling an economy-wide issue (inflation, unemployment) as microeconomics.
- Thinking the two are unrelated — micro decisions add up to macro outcomes.
Exam technique
When a question mentions "the economy as a whole", "national" or "general price level", think macro. When it mentions a single market, firm or good, think micro.
Quick revision
- Micro = individuals, firms, single markets.
- Macro = whole economy: growth, inflation, unemployment.