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Introduction
to
Microeconomics
CH 1 Mircoeconomics | Class 11
Notes + 10 Years Integrated PYQ's
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 Micro Economics -

bhapter -

Introduction

An
*
economy
is a
system which
provides people ,
the
work
means to and earn a
living .

Microeconomics Microeconomics that

* -
is
part of
the behaviour
economics
individual theory ,
which studies

of units
of log outputs
an :

economy
-

Individual Income
,
Individual .

Its tools demand and

main are
supply .

[ Adam Smith the the

is
founder of field of
microeconomics ]
Macroeconomics Macroeconomics
* is that part of economics
-

which
theory the
behaviour
ofdfatioaggregates
ual income
studies the

of economy
as whole .

Eg :-
,

aggregate
It
aggregate
tools
output etc .
main are

demand and
aggregate supply .

* Positive Economics -
Positive Economics deals with what
the
are

solved
economics
It
problems
deals
and
•
how are
they
actually .
with
things as
they
leg
'
India
are : is an
overpopulated country
on
-
.
 prices are
constantly rising
* Normative economics -
Normative economics deals with
what
ought to be on how
.
the economic
problems should
be solved It tells what
ought Eg India
'

.
us be .
:
-

should not be an
overpopulated country are

should not
prices rise .

* Market
Economy Market
Economy is the in
-

one

which
controlled
means

and
of production are

the
owned ,

It
operated by private
Features
sector .

is also called bapitalist economy .

:

Private ownership of
1 our means
production
.

s .

Independent decision
making .

level
3
High of competitions
.

4 .

Profit motive
Non
5
interference of governmentall
.
-

G .

Profit mechanism
guides decisions and it works
demand
through force of and
supply
.

*
Genteelly planned
economy refers It to an
economycontrolled
in which
-

owned
means
of production are
,

and It
operated
Features
by govt .
is also called socialist
Economy .

z .

State ownership over means

of production .

Decision
2.
making by govt
-

No
s .

bompetition
 Social
4.
welfare motive
Planing mechanism all decisions
5
guides
.

There
factors of production
* 4
'

are
-

Land Labour bapital Enterprise

Economics problem An problem
basically
* -

economics is

involving limited
problem of choice
a
satisfaction of
unlimited
of having
wants out resources

alternative uses .

Reasons problem
for economic :

Iconicity Resources limited

i) relation
of resources are in
-

to their demand and can't all

economy produce
what want
people .

Lii) Unlimited human wants Human wants are never

endingthe
-

and
differ in
priorities ( intensities ) .
This increases
use
of resources that are
already scare .

Alternate Resources
uses are not
only scare but
they
-

also be
put to various Thus
economy
can uses .

has to make choice between the alternative uses

the
of given resources .
*
Scarcity relation Scarilyto refersdemand to limitations
of supply in
-

for a
commodity .

Hoarily is universal .

bentral problems
*
of an

economy
:

1 .

What produce
to -

problem involves selection and services

this
to be
of goods
produced and the quantity to be

produced of each selected commodity It has aspects .

2 :

a) What possible commodities to

produce .

b) How much to
production .

How to
produce
-

2 .

This problem refers to selection of technique to be used

for production of goods and services These techniques . are :

at Labour intensive
technique
by bapital intensive
technique
3 :
For whom the
produce
-

of produced
this problem relates to the distribution
individuals
goods
the
and services
among
the within

economy
.
 The above problems studies the problem
*
•
Allocation
s are
'
under
of
of Resources .

* Production
It
Posibility Frontier / beuve (
/
PPF )Ppc

combinations
is the
graphicalthatrepresentative of possible with
of two
goods
becan
produced
given resources and
technology .

PPF
of tanks and wheat

* Assumption for PPF

1 .

The amount
of resources in an
economy
is
fired .

With amount
2.
the help of given resources
,
only 2
goods
be
can
produced .

3 . The resources are

fully utilized
↳ Resources are not
equally efficient in
production of all

products .

The level assumed constant

5.
of technology is to be .

*
opportunity cost -

opportunity
alternative
cost is the cost
of meat

best
foregone .
 ( Mod
*
Marginal opportunity units
lost Moc
refers to the
-

of of commodity sacrificed
number a

to additional
gain one unit
of another .

bharacttnistics PPF
*
of
-

H PPF
slopes downwards due to inverse relation between
change in

quantities of 2 commodities .

21 PPF is concave
shape due to
increasing MRT

31
Marginal Rate
of Transformation (MRT)
the
MRT is ratio
of no .

of units
of a
commodity
sacrificed to
gain
an additional unit
of
another
commodity .

Eg :

T c

§
-

S E

x
wheat →

Shift in PPF :

i)
Rightward Shift : It
happens when there is advancement
in
technology ,
growth of resources or an
 Leftward Shift : It
happens when there is
technological
degradation or decrease in resources .

*
Differences :

Basics I micro -
Economics Marco -
Economics

÷÷÷÷:::¥
It that
Meaning
is
part of It is the
part of economic
theory
economic
theory which studies the which studies the behaviour
of

o.

Objective It aims to determine

price of It aims to determine income

a
commodity of factors of production Ef employment level
of a

country .

It involves limited It
Degree of degree of involves
highest degree of
Aggregation aggregation aggregation .

' ' '

Price 4
'

Income
other name
Theory Employment theory
Individual
eonamplls income National Income