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Introduction To Microeconomics Cheatsheet @ajnabijee

The document provides an overview of microeconomics, defining key concepts such as scarcity, economizing resources, and the distinction between microeconomics and macroeconomics. It outlines major economic problems, opportunity cost, and the production possibility frontier (PPF), including its characteristics and implications. Additionally, it explains the effects of changes in technology and resources on the PPF.

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16 views3 pages

Introduction To Microeconomics Cheatsheet @ajnabijee

The document provides an overview of microeconomics, defining key concepts such as scarcity, economizing resources, and the distinction between microeconomics and macroeconomics. It outlines major economic problems, opportunity cost, and the production possibility frontier (PPF), including its characteristics and implications. Additionally, it explains the effects of changes in technology and resources on the PPF.

Uploaded by

haqedodab.jotudamaq
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Introduction to microeconomics Cheatsheet

1> Economy is a system that provides people wit the means to


work and earn a living.

2> Scarcity refers to a situation in which resources are


insufficient to meet all the human wants.

3> Economising of resources refers to making optimum use of


the available resources.

4> Economics is a social science that studies the way, a society


chooses to use its limited resources, which have alternative
uses, to produce goods and services and to distribute them
among different groups of people.

5> Two branches of Economics :


Microeconomics – Part of economic theory that studies the
behavior of individual units of the economy.
Macroeconomics – Part of economic theory that studies the
behavior of aggregates of the economy as a whole.

6> Positive economics – Deals with the economic problems and


how they are solved. For example, India is an overpopulated
country or prices are constantly rising.

7> Normative economics – Deals with what ought to be or how


the economic problems should be solved. For example, India
should not be an overpopulated country or prices should not
rise.

8> Distinction between Microeconomics and Macroeconomics


:
a) micro studies the economic behavior of individual units,
whereas macro studies the economy as a whole.
b) The main tools of micro are demand and supply, whereas the
main tools of macro are aggregate demand and aggregate
supply.
c) The basic objective of micro is price determination, whereas
the basic objective of macro is the determination of the
equilibrium level of income and employment.
d) The aggregates of micro have limited degree of aggregation
as compared to aggregates of macro.

9> Major central problems are :


What to produce: It refers to the selection of goods and
services and the quantity to be produced of each selected
commodity.
How to produce: It deals with the selection of techniques, i.e.
to use labor-intensive or capital-intensive techniques for the
production of goods and services.
For whom to produce: This problem relates to the distribution
of produced goods and services among the individuals within
the economy.
10> Opportunity Cost – It is the cost of the next best alternative
forgone.

11> Production possibility frontier (PPF) – It refers to a graphical


representation of all the possible combinations of two goods
that can be produced with the given resources and technology.

12> PPF slope downwards – As more of one good can be


produced only by taking resources away from the production of
another good.

13> PPF is concave shaped – due to increasing marginal rate of


transformation (MRT), i.e. more and more units of one
commodity are sacrificed to gain an additional of another
commodity.

14> All points inside PPF – Are inefficient. Points on the curve
are efficient. Points outside the curve are impossible.

15> Rotation of PPF – Occurs when there is a change in


technology or resources for one commodity only.

16> Shift in PPF – Occurs when there is a change in technology


or resources for both the goods. PPF shifts right – in case of an
increase in resources or technological upgradation. PPF shifts
left – decrease in resources or technological degradation.

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