2. Content
1. Introduction
2. Consumer’s Equilibrium and Demand
3. Producer Behavior and Supply
4. Forms of Market and Price
Determination under perfect
competition with simple applications
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
3. • Meaning of microeconomics and
macroeconomics
• positive and normative economics
• What is an economy? Central
problems of an economy: what, how
and for whom to produce
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
5. • Lionel Robbins defined economics as. “the science
which studies human behaviour as a relationship
between ends and scarce means which have
alternative uses”
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
Lionel Robbins
7. • Economy refers to the whole
collection of production units in an
area by which people get their
living.
• All such institutions and organization
which provide people with the means
to work and earn as income, are
collectively called as economy .
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
9. • Positive economics is that branch of economics which
deals with economic issues as “what is”.
• It is based on facts and actual data.
• It deals with a real life situations, justifiable by facts.
• In this analyze, we study how the different mechanisms
functions
• Examples :
1. Real Gross Domestic Product is calculated on the basis
of ‘Base year price’
2. There is high rate of that is 8.8% unemployment in
India.
3. Western Railways has earned 517.41 crores by selling
scrap materials in 2018-19
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
10. • Normative economics is that branch of economics which
deals with economic issues as “what ought to be “
• It is suggestive in nature.
• Normative statements can only be assessed relative to
beliefs and value judgements.
• In normative economics analysis, we try to understand
whether the mechanisms are desirable or not.
• Examples :
1. The unemployment rate should be reduced
2. The government should decrease its own expenditure
and increase taxes to reduce the rate of inflations
3. The government should promote social safety nets to
take care of the poor population.
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
12. • In microeconomics, we study the economic behavior of
individual economic agents in the markets for different
goods and services.
• For example demand for consumer, supply by producers,
etc.,
• In microeconomics, we try to figure out how prices and
quantities of goods and services are determined through
the interaction of individuals in these markets.
• It is also called as ‘ Price theory’
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
13. • In macroeconomics, we study the economic behavior of
the economy as a whole
• In macroeconomics we are interested in finding out how
the levels of these aggregates measures are determined
and how the levels of these aggregates measures
change over time.
• It is also called as ‘income and employment theory’
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
14. • In MICRO the alphabet ‘I’ stands for Individuals , the
term ‘micro’. Has been derived from Greek word ‘mikros’
which means ‘small’.
• In MACRO the alphabet ‘A’ stands fro Aggregates, the
term ‘macro’. Has been derived from Greek word
‘makros’ which means ‘large’.
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
15. Is there is any
interdependence of
Microeconomics and
Macroeconomics
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
16. • What ought to be (used to indicate something that is
probable )
• By economic agents , we mean those individuals or
institution which take economic decisions.
Such as consumers, producers, government, corporation,
Banks, etc.,
• Science = Study of fact
Human behavior = consumer, producers, investors, etc.,…
Alternative uses = different way the resource can be used.
Scarcity = demand is more than supply
End = wants
Means = resources
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
18. ‘ Economic problem’ means the problem of making choice
among alternative uses of resources since resources are
scarce In relation to unlimited wants.
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
19. 1. Unlimited human wants
2. Scarcity of resources
3. Alternative uses of resources
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
21. 1. The economy has to decide which goods and services
should be produced with given resources, which are
scarce, and have alternative uses.
2. With the fixed resources the economy can produce
several combination of different goods and services.
The problem is which combination should be produced.
3. Whether to produce more of consumption goods or
investment goods
4. Whether to use resources in education and health or in
building military services.
5. This central problem arises because resources are
scare and have alternative uses
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
23. • The central problem ‘ how to produce’ is the problem
relating to the choice of technique of production.
• It means that which technique of production should be
used in producing different goods and services selected.
• Broadly, the choice is between the two types of
technique- labour intensive technique and capital
intensive technique
• This problem arises due to availability of alternative
techniques of production
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
25. • The central problem of ‘for whom to produce’ means that
how should the final goods and services produced in the
economy be distributed among people,
• Who gets how much? Who gets more and who gets
less?
• Since income gives people the purchasing power, these
goods and services can be bought only be those who
have income
• This problem arises because with the scare resources
the output produced is limited while the wants of people
are unlimited.
Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
