Economics is an old field that has understood the complexity of its subject for a long time, but, like biology, the chasm between micro- and macro-economics is difficult to bridge using traditional theories. Macro-economics attributes variations in market trends to few variables that affects the entire economy while assumptions about the influence of individual is determined by the conflict between need to work and desire for leisure. Micro-economics studies the situations and disposition of individuals and how choices of individuals are reflected at the level of the market. As in biology, macroscopic and microscopic observations are not entirely compatible, so many researchers have turned to statistical models used in physics to reconcile approaches.
Inflation, unemployment, economic growth, balance of trade, fiscal and monetary policies, are the variables considered by macro-economics. The statistics taken from these variables show how the economy is balanced from interactions between these features, and in good times there is a direct linear correlation between macro-variables and the set of micro-interaction, but during hard times this relationship is no longer linear. Results from micro-analysis does not support the claims of macro-economics. Moreover, macro-economics fails at explaining events behind an economy's constant cycle of thriving and declining. The concern of macro-economics is the form of behavioral relations, whether its slope is positive or negative. Behavioral relations are functions describing production, consumption and investment. Equilibrium is a question of market clearing. Markets are subject to supply and demand and are interrelated since they share sets of variables.
There are many models developed in the study of micro-economics. Micro-economics is busy with the concerns of human individuals in a population and their impact on economic trends. There are two main approaches; new classic economics reduces macroscopic phenomena to incremental shifts in microscopic constituents' states, and the new Keynesian that focuses on microscopic behavior consistent with macroscopic phenomena. New classic economics postulates that rationality is the driving mechanism in individuals and that this is how a utility function can be defined as based on the rational choices of individuals who will invariably make choices that will maximize their own happiness. A utility function is a set of commodity bundles that have been assigned rules of desirability. It is also the objective function that a household tries to maximize. New classic economics does not allow for structurally emergent features such as unemployment during the Great Depression.
New Keynesians reject the idea of idealized household that has no internal structure for a more complex analysis of interactions within households that can lead to emergent structural changes in large scale economics. They consider explicit relations and realistic competition that occur between firms and other institutions and delve deeper into interrelationships between constituents of the economy.