The subject matter of economics is presently divided into two major branches:

Micro-economics and macro-economics, these two terms have now become of general use in economics.

Micro-Economics : It studies the economic behaviour of individual economic units and individual economic variables. The unit of study in micro-economics is the part of the economy, such as individual households, firms and industries. Thus, the study of economic behaviour of the households, firms and industries forms the subject matter of micro economics. In other words, micro economics is a microscopic study of the economy. For example, microeconomics is concerned with how the individual consumer distributes his income among various products and services so as to maximize utility. Micro-economics also seeks to explain how the individual firms determine the sale price of the product, how much to produce, what amount of product will maximize its profit, how to minimize the cost of production.

Macro-Economics : Macro economics is the study of the economy as a whole. The unit of study in macro economics is the entire economy rather than a part of it, and it deals with the problems faced by the entire economy. Thus, macro economics deals with the functioning of the economy as a whole. 

For example, macro economics seeks to explain how the economy’s total output of goods and services and total employment of resources are determined and what explains the fluctuations in the level of output and employment. Macro economics explains why sometimes economy is operating at near-about full employment, and why, at other times, there is high degree of unemployment; why sometimes there is full utilization, of the economy’s productive capacity, and why, at other times, there is under-utilization of the economy’s productive capacity.