This document provides an introduction to microeconomics and macroeconomics. It defines microeconomics as the study of individual agents like households and firms, as well as the prices of individual goods and services. The document outlines the scope of microeconomics, including how resources are allocated and goods are distributed. It also discusses the importance of microeconomics and its limitations. Macroeconomics is defined as the study of aggregates and averages across the entire economy, like unemployment, GDP, and inflation. The key difference between microeconomics and macroeconomics is that micro focuses on small, individual parts, while macro looks at the large, overall economy.
This document provides an introduction to microeconomics and macroeconomics. It defines microeconomics as the study of individual agents like households and firms, as well as the prices of individual goods and services. The document outlines the scope of microeconomics, including how resources are allocated and goods are distributed. It also discusses the importance of microeconomics and its limitations. Macroeconomics is defined as the study of aggregates and averages across the entire economy, like unemployment, GDP, and inflation. The key difference between microeconomics and macroeconomics is that micro focuses on small, individual parts, while macro looks at the large, overall economy.
This document provides an introduction to microeconomics and macroeconomics. It defines microeconomics as the study of individual agents like households and firms, as well as the prices of individual goods and services. The document outlines the scope of microeconomics, including how resources are allocated and goods are distributed. It also discusses the importance of microeconomics and its limitations. Macroeconomics is defined as the study of aggregates and averages across the entire economy, like unemployment, GDP, and inflation. The key difference between microeconomics and macroeconomics is that micro focuses on small, individual parts, while macro looks at the large, overall economy.
This document provides an introduction to microeconomics and macroeconomics. It defines microeconomics as the study of individual agents like households and firms, as well as the prices of individual goods and services. The document outlines the scope of microeconomics, including how resources are allocated and goods are distributed. It also discusses the importance of microeconomics and its limitations. Macroeconomics is defined as the study of aggregates and averages across the entire economy, like unemployment, GDP, and inflation. The key difference between microeconomics and macroeconomics is that micro focuses on small, individual parts, while macro looks at the large, overall economy.
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Microeconomics-Unit 1
Introduction to Microeconomics Introduction
Economics is a social science concerned with the production, distribution, and
consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate resources. Economics focuses on the actions of human beings, based on assumptions that humans act with rational behavior, seeking the most optimal level of benefit or utility. Economics can generally be broken down into macroeconomics, which concentrates on the behavior of the economy as a whole, and microeconomics, which focuses on individual people and businesses. Microeconomics
Microeconomics is the study of the economic actions of individuals and small
groups of individuals. This includes, ‘the study of particular firms, households, individual prices, wages, income, particular commodities’. It is concerned with problems of income distribution. Its interests is in relative prices of particular goods and services. It’s a microscopic study of the economy. Scope of Microeconomics
Microeconomics studies :- How Resources are allocated to production of particular goods and services How the goods and services are distributed among the people How efficiently they are distributed Studies the price theory- How the price of a good is determined Firstly, there is a consumers market or a commodity market where the consumers meet producers to buy goods. The demand of the consumers depend on the prices of the product. Secondly, there is a producers market or a factor market. Here there is demand for factor services comes from the producers and supply comes from the consumers. Importance of Microeconomics
To understand the working of a free economy- The decisions of what to
produce, how to produce and for whom to produce is taken by the consumers and producers both.
To provide tools for Economic Policies-It provides analytical tools for
evaluating the economic policies of the state. It helps in formulating pricing policies.
Helpful in efficient employment of resources-Microeconomics helps in
economizing the scarce resources with efficiency. Helpto Business Execution- Helps in attainment of maximum productivity in a business.
Helpful in understanding the problem of taxation- A tax leads to reallocation of resources at times. Through microeconomics we study which tax leads to diminution of social welfare.
Helpfulin International Trade-It is used to explain gains from trade. It helps to
study balance of payments and also the relative elasticities of demand.
Toexamine the conditions of Economic welfare- Basically it studies the
subjective satisfaction of an individual.
The basis for Prediction- We can make predictions and plan the occurrence.
Constructionand Use of Models- Helps in understanding basic models in a
simplified way. Limitations of Microeconomics
It is based on unrealistic assumption of full employment in the economy.
It is based on the assumption of laissez-faire, i.e. capitalist economy.
It is concerned with the study of parts and ignores the whole.
It is misleading as what is true for an individual household may not be true to
the whole economy. Macroeconomics
It is the study of aggregates or averages covering the entire economy. Eg-
Unemployment, National Income, Aggregate supply, Aggregate demand.
Helps in understanding the working of an economy.
In Economics Policies In General Unemployment In National Income In Economic Growth Monetary Problems In Business Cycles Limitations of Macroeconomics
Fallacy of Composition- What is true to one may not be true to everyone
To regard Aggregates as Homogenous Ignoring individual difference Indiscriminate use can be misleading Distinction between Microeconomics and Macroeconomics
Microeconomics Macroeconomics The word ‘mikros’ means small The word ‘makros’ means large Study of individuals Study of the economy as a whole For eg-Income of a household For eg- National Income Based on partial-equilibrium Based on general equilibrium analysis References
