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CLASSIFICATION OF ECONOMICS
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Worldwide There are two types of Economics:
(1) THEORETICAL ECONOMICS.
FaceSMS.info (2) APPLIED ECONOMICS.
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THEORETICAL ECONOMICS: In general, economics is a science which studies the
economic activities of the people in their social life. These activities have been focused
by economists through inductive and deductive methods to arrive at economic
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theories/principles and economic laws. These theories and laws have been put together
to make theoretical economic. Theoretical economics provides us the tools which can
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be used to analyze the economic problems of the people.

Theoretical Economics or Economic theory has two parts:

(A) MICRO ECONOMICS.


(B) MACRO ECONOMICS.
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(A) MICRO ECONOMICS: Micro means millionth part of a thing. Therefore in micro
UNCERTAINTY THEORY OF PROFIT economics we study the small segments of an economy or in other words, we take up
UNCERTAINTY THEORY OF PROFIT the individual decision-making units of an economy in micro economics. For example
According to professor Knight, profit is the reward we analyze the demand of a product or of an individual and the equilibrium price of
for uncertainly-bearing and not of risk-... product rather than discussing the aggregate demand of economy and the general price
/ reward of a factor of production, analyzes of an individual firm or industry, the
DIFFERENCE BETWEEN SUPPLY AND STOCK consumption pattern of a person, choice of technique and different market situations etc.
SUPPLY Supply is the quantity of output
brought for sale in the market at a certain price,
micro economics is generally called the price theory.
e.g. supply of rice is 1000 kg and is...
In Micro Economics, following topics are brought under discussion.
BASIC PROBLEMS IN MICRO ECONOMICS 1) CONSUMER BEHAVIOR: The foremost topic that we study in Micro-Economics is
CLASSIFICATION OF ECONOMICS There the consumer’s behavior. Under this topic, different consumption theories explain as to
are two types of Economics: (1) THEORETICAL how a consumer maximize his total utility or satisfaction his monetary resources on
ECONOMICS. (2) APPLIED ECONOMICS. ...
different consumer goods.

ALFRED MARSHALL’S DEFINITION OF 2) PRICE DETERMINATION: It explains as to how the interaction of demand and supply
ECONOMICS
determine the price of different products. Hence, we also study the role of price
ALFRED MARSHALL’S DEFINITION OF
ECONOMICS Marshall is a well- mechanism in a free enterprise economy for the allocation of resources, determination
known economist. He was behind Smith and for of investment direction consumption pattern etc.
him all ...
3) NATIONAL INCOME DISTRIBUTION: Under this topic the distribution of national
INSTRUMENTS OF COMMERCIAL POLICY income among different factors of production in the form of wages, rent, interest and
INSTRUMENTS OF COMMERCIAL POLICY profits is studied.
The main instruments or tools which are
now-a-day used for achieving the objectives of ...

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12/28/2017 BASIC PROBLEMS IN MICRO ECONOMICS ~ Advanced Economics

RENT THEORY OF PROFIT IMPORTANCE OF MICRO ECONOMICS


RENT THEORY OF PROFIT The rent theory
of profit is associated with the name of American
economist, Francis A. Walker. Accordin...
We can realize the importance of the study of Micro-Economics from the following
points.
CRITICISM ON THE CLASSICAL THEORY OF
FULL EMPLOYMENT 1) UTILITY MAXIMINATION.
CRITICISM ON THE CLASSICAL THEORY OF 2) RESOURCES ALLOCATION.
FULL EMPLOYMENT 1. According to 3) INCOME DISTRIBUTION.
the classical economists the method of ov...
4) PRICE DETERMINATION.
5) OPTIMIZATION.
CHARACTERISTICS OF ECONOMIC LAW 6) WELFARE POLICIES.
CHARACTERISTICSOF ECONOMIC LAW (1)
ECONOMIC LAWS ARE CONDITIONAL: That is
why, at the end of the statement of each MERITS AND DEMERITS / LIMITIONS OF MICRO-
economic law it is...
ECONOMICS
SUBJECT-MATTER OF MACRO ECONOMICS MERITS:
SUBJECT-MATTER OF MACRO ECONOMICS
The Study of Economics is divided by the
modern economist into two parts Micro- 1) GUIDANCE FOR CONSUMERS: It enables the consumers to allocate their income
Economics a... on different goods in such a way that total utility is maximized; thus helping them to avoid
the wastage of resources.
MONOPOLY THEORY OF PROFITS
MONOPOLY THEORY OF PROFITS 2) GUIDANCE FOR PRODUCERS: It enables entrepreneurs to achieve the optimum
There is no doubt that profits arise from dynamic combination of factors production and thereby it enables them to maximize their profits
changes, innovations and from making a co...
or at least minimize their losses. When the rewards of factors of production are
determined in accordance with their marginal productivity, the chances of their
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exploitation are minimized. Thus it enables laborers as well to achieve suitable rewards
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PROBLEMS IN MICRO
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Classical economists uphold the opinion that there is always full employment in the
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economy of a country under Laissez-faire capitalism. This is so because price
mechanism or the interaction of the force of demand and supply automatically rationalize
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the allocation of resources. The basic economic problems with come up to be
automatically settled through the role of price mechanism are as under:
SOCIAL ICONS
1) HOW ARE THE PRODUCTIVE RESOURCES ALLOCAED?
FOLLOWERS 2) HOW IS THE LEVEL OF PRODUCTION DETERMINED?
3) HOW IS NATIONAL PRODUCT DISTRIBUTED?
Followers (1)
4) HOW IS THE PRODUCTIVE CAPACITY OF THE ECONOMY MAINTAINED /
DEVELOPED?

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