AMITY LAW SCHOOL

B.Com LLB
II SEMESTER

MICRO ECONOMIC THEORY

AND MANAGEMENT

Ms.CHETNA NEGI
MICRO ECONOMIC THEORY AND
MANAGEMENT

Module I: Nature and Scope of Economics

Introduction
 In the recent years, the subject-
matter of economics has been divided
into two branches: Micro and Macro
economics. These terms were
introduced by Prof.Ragnar Frisch of
Oslo university in 1933.
Meaning and Definition of Micro
Economics.
 The term ‘micro' has been derived from
the Greek word ‘Mikros’. Which means
small. Thus, micro economics is the
study of individual units of economy such
as individual consumers, individual firms
and small groups of individual units such
as various industries.
 Thus according to K.E.Boulding, “Micro
economics is the study of particular
firms, particular households, individual
prices, wages, incomes, individual
industries, particular commodities”.
IMPORTANCE OF
MICROECONOMICS

It is an important method of
economic analysis which
Prof.Keynes regards as “a
necessary part of one’s
apparatus of thought.”
1. Helpful in the efficient
employment of resources.
2. Helpful in Price Determination
3. Helpful in understanding the
whole economy.
4. Helpful in the formulation of
economic policies of
government.
5. Helpful in decision making of an
individual.
Limitation of Micro Economics
 Based on impractical assumptions-
Micro economics is based on certain
assumptions like full employment &
perfect competition etc. These
assumptions do not hold true in real
life.
 It does not provide real picture of
the whole economy-
 Results of Micro analysis do not
apply on the whole economy-
DIFFERENCE BETWEEN
MICROECONOMICS AND MACRO
ECONOMICS

1.The objectives of micro economics

on demand side is to maximise
utility and on supply side is to
maximise profits. Whereas, the main
objective of macroeconomics are full
employment, price stability,
economic growth .
2.The basis of microeconomics is the
price mechanism which operates
with the help of demand and supply
forces. whereas the basis of
macroeconomics is national income,
output and employment which are
determined by aggregate demand
and aggregate supply.
3.Micro economics is based on
the assumption of rational
behavior of individuals. Whereas
macroeconomics bases its
assumptions on such variables as
the aggregate vol. of the output
of an economy,etc.
4.Micro economics is based on
the partial equilibrium
whereas macro economics is
based on general equilibrium.
5.Micro economics is suitable to study
the problems of individual economic
units. Whereas macro economics is
suitable for the problems of economy
as a whole.