Microeconomics refers to that branch of economics which studies economic problems of an individual person or of individual firm. It provides microscopic view of an individual unit. For instance, the study of the economic problem faced by an individual when his income falls short of his expenditure or a similar study of an individual firm or producer provides the subject matter of microeconomics.
On the contrary, macroeconomics is a study of the economic problems faced by groups of individuals or of firms taken together. It is thus a study of aggregates. For instance, studies of national income and expenditure, or of the scarcity of income in the face of planned expenditure provide the subject matter for macroeconomics.
From the view point of the micro and macro classifications, the first three problems along with the fifth fall under microeconomics while the fourth, the sixth and the seventh problems form the subject matter of macroeconomics. As one approaches to economic analysis, the two are more often complementary than competitive.
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Neither the behaviour of an individual entity reflects the behaviour of an entire group nor does the behaviour of the group reflect that of an entity. An observation that a firm in electronic industry incurred heavy loss this year does not necessarily imply that all the firms in the industry incurred heavy losses and an observation that automobile industry in India is heading for huge profits need imply that every automobile firm in it is heading huge profits.
Likewise, an observation that a particular mango tree in a forest has decayed does not necessarily imply that all the mango trees in it have decayed or the entire forest has decayed nor does an observation that forests cause taint need imply that every mango tree in them can cause rain individually.
Indians are known for their hospitality all over the world but one particular Indian when tested for the attribute may test negative by letting his dog loose on the sight of visitors. Whatever is true of an individual need not be true of the community as a whole nor can one predict an individual’s behaviour on the basis of the behaviour of a community in general.
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Even then practice of generalization of individual observation to draw inferences about the community or the group to which the individual belongs and that of deducing individual traits from the community traits are quite common.
To crosscheck the validity of the inferences reached through generalization or through deduction, one needs to study the behaviour of the community in the former case and the individual in the latter case. It is in this sense that micro and macro approaches complement each other.
Note that generalization of individual traits to reflect community traits is known as the inductive method while deducing individual traits from the community traits is known as the deductive method.