Though macro economics is essential in economic analysis and has a great practical and theoretical importance, it suffers from certain drawbacks or limitations. The main limitations of macro economics are
(1) The macro economies deals with general welfare and disregards the welfare at individual level, though individual welfare forms an important part of economic study. For instance, if national saving is increased at the cost of individual welfare, it is not considered a wise policy.
(2) The macro economics analysis regards aggregates as homogeneous but does not look into its internal composition. For instance, if the wages of the clerks fall and the wages of the teachers rise, the average wage may remain the same. Such an assumption is unrealistic.
(3) It is not necessary that all aggregate variables are important. For instance, national income is the total of individual incomes. If national income in the country goes up, it is not necessary that the income of all the individuals in the country will also rise. There is a possibility that the rise in national income may be due to the increase in the incomes of a few rich families of the country
Limitations / Disadvantages of Micro economics
Posted in General Economics