What distinguishes microeconomics from macroeconomics?

The distinction between microeconomics and macroeconomics lies primarily in their scope of study. Microeconomics focuses on the behaviors and decisions of individual consumers, households, and firms. It examines how these entities interact within specific markets, how they respond to changes in prices, and the allocation of resources among different uses. For example, microeconomics would analyze how a price increase for a specific product affects its demand or how a firm decides to produce a certain quantity of goods based on costs and consumer preferences.

In contrast, macroeconomics encompasses the overall functioning and phenomena of the economy as a whole. It studies aggregate indicators such as national income, unemployment rates, inflation, and total economic output (GDP). Macroeconomics aims to understand large-scale economic factors and trends, which might influence the economy across sectors and regions, rather than individual market behaviors or decisions.

This clear distinction contributes to why the selected answer accurately reflects the fundamental differences between the two branches of economics.