UN1 T-:....

1
T.-:-
-1.NTRODU�TION To Microeconomics

Key Jirms
l· COY)Om
J1; � 1D 4h� area. wf-ere people__ h°ve._ anq earn.

2· 5ca:r:ci~
It- re.� to a smLaTLOn where. c-t� '4or
resourc.e.s rs fY)Dre. th.CU> #1e..i°r SUffly even at zero
frt°c.e .)_eveL . _

3� 1 fc.aoomks_
EU)nornf� fefers to makt0n&- chofc.es ln -the.
I rrese()ce of__�c.a._r_CJ_fY_· ------
1
I
"
I Mo,croeconorruc.s MacroetenomLc.s
4-. , oeum&m.1.
0

I 11:- rth to -Me..

-----
0

�iucl.t; - 96 °wJ/'v/bll!al elftYlo,r;tcs

� W?tfs frt aYL e,tftlomy _

5.
I MQet� eum etYt b -
It ts -the. �-ru_d_y ef eUJnomy ru 0- �Je.
� �- °'B�zrtes.
 6

yesourCes t
ltermatve Should
be! th Tt
related It Economics
oiostive
Economizing
reseMCes
means
of
CpportunityCet st EcenemlcA.
Normative
3t
1 therefonsthe to
efers reers
ree
eonomyGhypeof withthe actual
Mired
omyecemeLenomy.
Socialfstceenemny
zfabe
laisse Mauket makingcommodity.Le to
manket of to
the the. statements
ecenomy situallon
the
valwe statements
economics
fdeal e
eonomy eenomy/ best
f
/ of situaton bd
use
'entreprnur
/ capitalit secend eeonormics
ot Wh
centrally at
the et is
-
eenemy auailable best. related
what
lanned eonomy
/
 3.

Its called
problers
Economîe deisiens
forcea economy
Market
It ’

otive
main is reers
pnte o
ve demand
to
hanîsm. taken the
is are
eenony
whexeall
{it and by
solyed
the
supply
n by
mauket.
the
This
maket
is eenon+c.
 3

Its Ecenemic elenemic

economy
Planned ’
plannedgeunment: t
main refu
problems cleciaiern!
mslouthonity.
u to
the
is are aue
soial ecenomy
soved taken

welfae. by by
the oheue
the
centray
centhal all
 ’Economic* 3.

Lt
goveun
ment
and
problens
Ecenodleisiens
goven
nÉc ment. It
unlimitedHuman
are wants) omieConc reble wefate.
soaland
motives economy
relMi
NA xed

o to
Calterna Causes e
asingprblem
Resources'
have aue taken the
making
Problen'
eLonomiC
problem
both eure eonomy
Uses
by
chfceA proft sotved the
and ohee
isAA by both
its maimí both
the eLenemic
maukt
Res Causes
are main zafonmasket
limited ources
and
’ Central problens of an economy
OR problerns of allocation of
resourRS.

What to froduceP
2- How to froduce ?
3 For whom toProduce

’What to Produce ?
chefce
It re<e to the problem e4 making
economy
ot the good to b produced in an
Yheue milliens ot goods to be produced
n an eLonomy.

|For example.
machineny , tracbr etc.
() Copital gools like
like toothpaste ,,sugar etc.
(2) Consumer goods bomb etc.
Wat time qoods like gun
3)
 Once the seledien about the goods to
abeut the
s made then next preblem
be produced & much to be produted ? 7
arise of H ow

How to Produce ?
ef cheice selated
It refers to the problem et
to productfen techncogy.
heue are tüoo types of prduction fehnology.:
Labour în ensive technelogy
2 Capital intensiye techoelagy
Labour in tensive tahnotogy refena labour
to the
produtien technic Lohere more
and less capitoal is used.
Capital in tensive technology refens to the
produtiem technic where Mone capital and
less labour is used.

For Whom to Produce ?

Yhis problem is related wwith the chaice betieen
Soia!' egualiy ad aDP
aue produce d for poor , soal egualty
Ifillgodsfnrease.
3. I 4 epensive goods are produced, nbP woil fnereae.
 ’ Rroctuction Rossibility Cune
I sa cuswe shouwing dierent conmbinalfons
of produclton o 2 .qda ot of given
rèsources and censtart
technology.
btherNames
Produdtien Possiblty
DR
Frontien
Tranafuumten
OR
Cuue
Froductton Possibility Boundaxy
SAssumpton PPC.
Resounces ate dimited
Fulley util2atien e resoUrces
3.
Production techoelogy rermains anstant
MRT is rising, and no nesourte is egually.
efient in the productim a both tte goods.
5 Dnly too goods are procluced.
Marginal Rate c Tronsformatfon (MA).
It refers to change n the producion of
gooo - due to change in the productfor of
good-2.,
change in Productfon of go0d--1
MRT = change n Productfon of good-2
 S/ope of PPC MRT or M0C

*
alure o Procuction Possibilty.
frontier
to vight
(0) PPC slopes dounwand kuom leftcommodiy
because i} pnductien"e ene
to benciased then produton sf othën.
Commocy must be saudfed as theye is

(b) PPC Îs cencave to the origin because st

incueasing manginal oppatunity cot bo

*
Cases of shit in PPC
The produclien pessibility cwue will shit
hwo cenditiens:
wnde
tallacing
(a)change nHULoceA
(b)\change in tchnolgy pmduction for both goadts.
Kightuand shit o PPE shous incease în
iscunces g inprVement in technblagy. example
lobour becoming' meye skflled, fmprovement in
technolegy ,fnreae in productfvity of dand.
 leltwand shilt o PPE shoe tte deuase
reJances of deguadatien of tehnoegy
the eLenomy

* |Produdien eo an eenomy îs beloo its

poBentfal due to unemploy ment. Gyoveunment
stasts employmernt gernatten schenes.
Sxplain îk efect using PPC.

When the ecen emy is belas its petetial

oue to unemployment the ecenomy cperates
instde the PPc when the govenment ststs
employnent gener atien scheme, it enables
the' eLonormy to utlse it eisting esces
an optimun manner. he fle resource
will now tilised and the eemomy
funclions, at it maximum cap aciy snd moves
loside the PPC to point on the PPC.
Juem
yhus, eLenemy, movesPPC. uen insid the PPc
to any pnt en PRC

What happens to PPC esouces aHe

not ullyy and

and yftenty emplayed
aHe net fully employed ox pot
eMiently empleyeal otal prduitin wit
take phce 'below PPC toSay
to at pointU.
t mears that eenomy i not producng
and seuicee t ft full'potental.
 Gqood
y
A
8
6+
4
2 B

2 3 4
Gjood X

An eenomy
ínside.a PPE
alays producer on ,but not
Defehd
Ihe given statement fs rekitid. An economy
Opeuate em PPE, enly whenreUH COL aHe
fully eently tlaed.
meansi tiue is unemployment or fneticient
use s reZbunces, then he eemomy may openate
fnside te PPE. So, the ecenemH may opeate
at psit 'H' o 2ddtem to he pnt 0n the
Cunve AB em PE.
A Resor Ces aue
eticient ufsed ullyand
.He Resources aye nderutiied
or ineutudeny utlied,
X
hit
in
ion

iliy

Curve
 When resources increase
tvey eLeneny ties to inceeae it res eUYces
So that more Can be procuced. Pc fs based
Sn the Qssumptienm that reLOwces. fred
meHe a ne god can be produced only by
sauitaingProduce
annat orhe quantty if other goðdk. We
more o4 both the Joods.
HoweveH, alhen nesoUres fncuased
produce one boh gooda. Ihene fore, PPe
shs upusand ai ightsand.
G0oy

hoodx
 ResoueA
calamittes
like techneBogy
pnduced
cahtis
theef
lange toWhen ofGjchanges
enaxWhen
Kpooy wauddyt pool K
t unusual Shit ally
cale s
PLenemy Hesecek technste
of In withthe Change
PP happening 4 botm
hapaning
tuch miu PP
r demases. oode, ughtoaid.
odx alien decHuases Fronttn hood x t emeans n
shustin soety echnblog
societs good.
hen o4 !.that
eauthuakes, ke
es populalin
Ihies wthen
wH
wasmouy Jhu nore
yoduction
PPC Resonces iu
deveate
natual
PC
e (an for
shi, epiema.o shifte
fofentolotteu Inae. betbee
due
 *A
someeeonerny
ot the
"number wl
eNe
PPFdeatroyed
wnernployment heMasive
man PrF. ft eHCeA
given Ponomy
pdint Dejend of it lst
towever to PP
unemployment Leftwad
ot tothe afect oß
ttatmendt
fnsicleproduce. doe unft) n
o Butter in
oe has eonomyP
poKfble people
P F the P the
es. the
, net
fute. technotogical
veOuces
03)ane iP in
an
elen deueased,
So, degadáion shits econ
chit cembhation PPF
P E omydeoneáse when It died
thererefuted. wl to inOmy. w
boppeni canthguake.
oue wl shit the
thene fPF due
téw
wfll he shitt the and
openate the Buteh. of defe t
to bMascive
copacity koth oueitloble many
odevutil PPF to
deutuucton becauie eenomy
no Juns enase puern the
at
thift factoves
ot to PPt the left
zaten the and with ?
in
 butte then Ahen
oRotation fCapacity
or emly It
Guns (m cnit)
fom Hoever, cemmodity
an
PPE heese the bnehoppens
Rotation of
PP
A AB then commodity fncMease (rources
to in e
tocommodity engo0.
commodity
Rotationfor AD l is ohen
0tation
uttrd will
PPE l case
Dtate commodity a
utter
unft)(o en
e in the or
of he there
X-axs.theon technolagical
împovemert on
rewnesthe tehnolog
Yotallen
D technolbg em ythe
C>X rotate X-ax - iss
AB onaxis axis change y>
Rightway o can
Hotatie prndutionto îcal to for the wit%
degradatfon (shy. orbe în
the AC.
productfon X-axis reiped
butes), eîthe
produdtve
left
to
 units)
GnGruns Rotation tor cemmodíty
on they-axis
A Rizhtwand
D
Letward
otulien

8
(Buter (nunit)
Rotatin fox cammodity en the yaxis
inprovement o an muale
A technological inproyement
bn -ass (say,9uns) u Yotite te PPE
uem AB to C8.
Howevex, n case ot deguadatien ntechnalogy
guns, wil sotate the PPE to the l t eo
guns
AB to DB_ a shouon n
Overview of PPF
Let qyuckly tevîse the concept of PPF Loth
the helpommoty-y
diagan.
Eunattinable
Pofnt
8

Soutnd
shi7t Shit
un derutlisdh
Commoity-x
 It the eCenemy & en PPc it fodiota
fuller itilzaton producing
I the econony is poducing at anypoint undlar
the cswe this shoui e i c e s e n t
utilleed upto el duud undesitiliatin of
I74 the psnt i siuatd abaue PPc, dates
guswth usowMs.

Lmportant Points
Points bout PPC.
PPC slopes dauonwavda, as an encease in
produten eme gs0d eqica aecuase in
pmductien. the othek.
'PPE cencave shaped due to heasing Moc/MRT
3 Ih the ecemomy speates en PPFtmean¢
4
fuly and einty tlizad.
IPPF the elnemy opeHates aat any point fostde
t mean newhces Be not
lly and
etinty tlisnd.
5.
Euenemy Cannot aperate at any psfnt atidk
PE, unattainable wih tte ayaîlakle
productie tapaiy
 b

Combinaion
meani lenstant
adolitienal
Sawfte
anoten time MRTIt Censtant
S MRI BYhve
D C B A MRT S
4
that Societs NRT
1 in posikilhies
auetD
Goodx 0S MRT
5 4 3 2 all
poduien unicenatant
t
w
Haid
dx hood y
a is
2 3 4 5 CLs geoe it not
X
gooods
au means
to
goeda. the inceasng
Egyually prpcuce that
MRT
rate
euy
fene
 C
hoodx
hoodyacitleéd
Conmbinalon
to It I!
D B A be
means
Case
this is falling
yooct y produ(ed MRIÎS
2
goes
4 3 ewuytme
3 6
decuaasin9. he
no
Goodx additienal
of
2:1 3:1 4:|
x MRT Prc wnit
"is ofunit
convexother of
goods goo a
 6 3.
4 1IncHease in
Ciovestmert leducatiem)
Make Padh enhancerent
ao
Betf Yoga Educaten Deuulepment
campaign
India
clean l |Reasorsfoe
ent)Invease
Capiiscignfn Plans SRltehnolegy fh
Progamme ImpovementResouCO&Rightwaidshi7t
tal Ba
in lh
capita ( Indie chae, eclth for
all lhaing)
&et )

tenorsm
lan,ommi,dnghtet)
Miqration TsunNatunal
(flood,talamites
Technetegial
ebsoleten
Deceeaseleftwand
inchi7t

eautmyuae

unemployrrent
Eadication PPC. inAo
gramme ehaa