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Class 12TH Notes Microeconomics

Class 12 notes microeconomics.

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125 views4 pages

Class 12TH Notes Microeconomics

Class 12 notes microeconomics.

Uploaded by

vk8892618
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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STUDY POINT COACHING CENTER

SECTOR 49 NOIDA
INTRODUCTION MICROECONOMICS
Microeconomics is the study of how individuals, households, and businesses
allocate scarce resources. It is a discipline of economics that focuses on
individual economic agents’ behaviour and how they interact with one another
in the market.

Macroeconomics: - Another area of economics that deals with aggregates is


called macroeconomics.

MICRO ECONOMICS: It is the branch of Economics which deals with individual


units.

 It is also called price theory, demand theory, cost theory etc.

MACRO ECONOMICS: It is another branch of Economics which deals with


aggregates.

1. John Maynard Keynes is considered as the father of Macro Economics.


2. It is otherwise called income theory.
3. The main difference between MICRO and MARCO Economics are the
following.

POINTS OF
MICRO ECONOMICS MACRO ECONOMICS
DIFFERENCE

Unit of study Individual Aggregate

Method Partial Equilibrium General Equilibrium

View point Worm’s eye view Birds eye view

Demand for a pen, salary of a National income, aggregate demand,


Example
person, utility, cost etc. inflation, money supply

CENTRAL PROBLEMS OF AN ECONOMY


As we know the Central problems of an economy arises due to the following reasons.

1) Human wants are unlimited.


2) Resources are limited
3) Resources have alternative uses.

1- WHAT TO PRODUCE AND IN WHAT QUANTITIES?


 Every society wants thousands of goods and services.
 Since resources are scarce, all these goods and services cannot be produced.
 So if has decide to what type goods are produced.
2- HOW TO PRODUCE:
 It is the problem related with the technique of production.
 There are two techniques of production — Labour intensive and Capital intensive.
 Labour intensive is a production technique, which uses more amount of labour and
less amount of capital.
 Capital intensive is a production technique, which uses more amount of capital and
less amount of labour.
3- FOR WHOM TO PRODUCE :
 It is the problem related with distribution.
 It means distribution of output among the factors of production.
 This is called functional distribution.

CONCLUSION:
 Thus it can be concluded that every economic system faces three basic economic
problems.
 Solution of these economic problems depend upon the Nature of the economic
system.

PRODUCTION POSSIBILITY CURVE OR PRODUCTION POSSIBILITY FRONTIER


 It is defined as the locus of points of two goods which an economy can produce with
the available resources and the given level of technology. The following is a PPC.

PRODUCTION POSSIBILITY SET:


Production possibility set of two goods are produced, with the given technology and
resources. The following table shows different production possibilities of two goods
— Rice and Wheat.

PRODUCTION
RICE WHEAT
POSSIBILITIES
A 20 0

B 13 5

C 10 7

D 4 10

E 0 15

The graphical representation of the above table is called production possibility curve.

OPPORTUNITY COST :

Opportunity cost is the next best alternative product or service that has been sacrificed or
forgone.

MARGINAL OPPORTUNITY COST:

 It means the additional cost interms of a number of units of good sacrificed to produce
an extra unit of other good.

 In other words it is the ratio between ∆X and ∆Y.

MOC= ∆Y/∆X

 ∆Y = change in the quantity of good Y

 ∆ X = change in the quantity of good X

 There is an important relationship between MOC and PPC.

 If the MOC increases, PPC become Concave in shape.

 If the MOC decreases, PPC become Convex in shape.

 If the MOC, constant PPC become a straight line in shape.

 This can be illustrated with the following table

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