MICRO ECONOMICSCHAPTER=1INTRODUCTION TO MICRO ECONOMICS
ECONOMICS = Economics is a branch of science in which we study human behaviour and his economic activities.
CLASSIFICATION OF ECONOMICS
Economic can be divided into two parts:
1 MICRO ECONOMICS
2 MACRO ECONOMICS
MICRO ECONOMICS
Microeconomics is a branch of economics in which we study individual economic activities. for example individual saving, individual supply, individual demand etc.
MACROECONOMICS
Macroeconomics is a branch of economics in which we study aggregate economic activities. for example national income, full employment and aggregate demand etc.
DIFFERENCE BETWEEN MICRO ECONOMICS &MACROECONOMICS
MICROECONOMICS in this we study individual economic activities it is determined by price the main tool of micro economics is demand and supply for example individual saving individual demand individual supply etc
MACROECONOMICS in this we study aggregate economic activities it is determined by income the main tool of macroeconomics are aggregate demand and aggregate supply for example national income etc
ECONOMY
An economy is a system that provide people with the mean to work and earn to living in the process of production.
CLASSIFICATION OF ECONOMY
An economy can be classified into three parts;
1 MARKET ECONOMY (CAPITAL ECONOMY)
2 CENTRAL PLANNED ECONOMY (SOCIALIST ECONOMY)
3 MIXED ECONOMY
MARKET ECONOMY = An economy in which all the economic activities are organised by capitalist or private sector. for example USA ,UK, France, etc.
CENTRALLY PLANNED = An economy in which all the economic activities are organised by government for its departments. for example Russia.
MIXED ECONOMY = An economy in which some economic activities are organised by government and some activities are organised by private sector on the other hand in mixed economy both private sector and government sector involved in in economic activities. for example India.
DIFFERENCE BETWEEN MARKET ECONOMY , SOCIALIST ECONOMY & MIXED ECONOMY
MARKET ECONOMY
Meaning = in this economy all the economic activities are organised by private sector .
Motive (objective) = the main object of this economy is maximum of profit.
Government Interfare = in this economy no government interfere is required .
Solution Of Central Problem = in this the central problem solved by price mechanism.
Example = America United Kingdom, France etc.
SOCIALIST ECONOMY
Meaning = in socialist economy all the economic activities are organised by government sector.
Motive (objective) = the main objective of this economy is social welfare.
Government Interfare= in this economy government interference is required.
Solution Of Central Problem= in this economy socialist economy the central problem is solved by Planning Commission and planning officer .
EXAMPLE = Russia.
MIXED ECONOMY
Meaning = In this the economic activities are organised by both sector.
Motive ( objective) = the main objective of this economy is social welfare and profit maximization.
Government Interfare = government interference is required in only some activities
Solution Of Central Problems = in mixed economy the central problem is solved by modified price mechanism.
Example = India.
RESOURCES = Everything in our surrounding which are helpful in production activities are called resources. for example land resources, labour resources, capital resources, human capital.
FEATURES OF RESOURCES
There are the main two features of resources are
1. LIMITED RESOURCES = the resources are limited because their production rate or sources became Limited
2. RESOURCES HAVE ALTERNATIVE USES = resources can be used in more than one activity so resources have alternative uses for example what we can be used in various activities like water is used as drink ok and water is used for bathing water is used for cooking water is used for washing clothes.
SCARECITY = it is a condition where supply of commodities or resources became less than its demand this situation is called this condition is called scarcity.
Scarcity is the root of central problem.
CENTRAL PROBLEM
The choice problem in the central problem of economy because it creates three major problems;
1. What to produce?
2. How to produce?
3. For whom to produce?
WHAT TO PRODUCE?
It is the problem of choosing which community should be produced and in what quantity as food and clothes much food and less cloth and vice versa, wheat and sugarcane, between necessity good and luxury good decide all goods cannot be produced due to limited resources here the guiding principle is to allocate resources in a way that generate maximum utility.
HOW TO PRODUCE ?
( CHOICE OF TECHNOLOGY)
Which is the problem of choosing method or technique of production it is because the commodity can be produced in more than one method more labour and less capital or vice versa large scale production for small scale production for example given amount of heat can be produced either by using more land and less capital or more capital and less land the guiding principle in such cases is to adopt those techniques which has least possible cost to produce per unit of commodity.
FOR WHOM TO PRODUCE ? ( PROBLEM OF DISTRIBUTION OF INCOME)
This problem who gets how much of the goods that one produced this problem basically depend on distribution of income it should be kept in mind that production is the result of combined effort of factor of production like land labour capital and Enterprises the producers always produce the committee for those whose purchasing power is more.
OPPORTUNITY COST
Opportunity cost of an active is equal to the value of next best alternative foregone.
MARGNAL OPPORTUNITY COST ( MOC )
Marginal opportunity cost of a particular good along a PPC is the amount of other good which is sacrifice the production and additional unit of that particular good M.O.C is also called Marginal Rate of Transformation ( MRT ).
PRODUCTION POSSIBILITY CURVE ( PPC )
Production possibility curve is a curve which shows a possible combination of two goods which an economy can produce with available technology and with full and efficient use of it given resources it is also called production possibility Frontier.
ASSUMPTIONS OF PPC
( PRODUCTION POSSIBILITY CURVE
- Resources are given.
- Resources are used fully and efficiently.
- Technology is given and does not change.
- Resources are not equal efficient in the production of all the goods.
PRODUCTION POSSIBILITY SCHEDULE
A schedule which shows the different combination of two goods produced in an economy with full utilisation of resources.
PRODUCTION POSSIBILITY CURVE : GRAPHICAL PRESENTATION
It is a graphical representation of production possibilities schedule which has been shown in the figure:
Production Possibility Curve (PPC)
FEATURES OF PPC : GRAPHICAL REPRESENTATION
- It is downward sloping from left to right.
- PPC curve concave to the origin.
PPC will be straight line if MRT is constant.
PPC can be convex if sacrificing units of other good goes on decreasing.
METHODS OF SOLUTION OF CENTRAL PROBLEM IN VARIOUS ECONOMY
Capitalist economy in this economy the central problem solved by price mechanism.
socialist economy in this economy the central problems found by planning Commissioner for planning officer which is established by government.
Mixed economy in this economy the central problems solved by modified price mechanism.
POSITIVE ECONOMICS
Positive economics is is shows to study of economic issues which are subject to verification. for example the extent of poverty and unemployment in India.
NORMATIVE ECONOMICS
Normative economics related to the study of economic issues which involves value judgement which are table. for example reservation In Jobs is final remedy to the problem of social inequality in India.
No comments:
Post a Comment