Microeconomics Chapter 1 Class 11 Notes | Economics Class 11 | Chapter 1 Notes

Microeconomics Chapter 1 Class 11 Notes

In this post, you find the chapter 1 notes of microeconomic that is economics and economy chapter name.

 

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What is Economics?

Economics is a science of human behavior concerned with the allocation of scarce means in such a manner that consumers can maximize their satisfaction, producers can maximize their profits and society can maximize its social welfare.

What is Scarcity?

It refers to the situation when what you have is less than what you wish to have. In other words,' scarcity' implies a situation when the supply of resources is less than the demand for resources.

What is Choice?

Choice refers to the process of selection from available

limited alternatives. It emerges because:

1. resources are scarce, and

2. resources can be allocated to alternative uses.

Two Basic Characteristics of Resources/Means-

Scarcity: Resources are scarce in relation to human wants.

Alternative uses: Resources have alternative uses. For example, land may be used to grow wheat or rice or may be used for the construction of buildings.

 Microeconomics vs Macroeconomics

  When the problems of choice are studied and addressed at the level of individuals, it is called microeconomics.

 When the problems of choice are studied and addressed at the level of the country as a whole, it is called macroeconomics.

Difference b/w 

                                  

                

Microeconomics	Macroeconomics
1.     Microeconomics studies economic relationship, or economic problem at the level of an individual- an individual firm, an individual household, or an individual consumer.	Macroeconomics studies            economic relationship or economic problem at the level of the economy as a whole.
2 . Microeconomics is basically concerned with the determination of output and price for an individual firm or industry. Accordingly, microeconomics is briefly referred to as the Theory of Price.	2.     Macroeconomics is basically concerned with the determination of aggregate output and general the price level in the economy as a whole. Accordingly, macroeconomics is briefly referred to as the Theory of Income and Employment.
3.     Study of microeconomics assumes that macro variables remain constant, e.g. it is assumed that aggregate output is given while we are studying the determination of output and price of an individual firm or industry.	4.     Study of macroeconomics assumes that micro variables remain constant, e.g. it is assumed that distribution of income  remains constant when we are studying the determination of aggregate output and income level.
5.     Market forces play a significant role in the context of microeconomics problems, like the problem of product pricing or factor pricing.	5.Government policies play a significant role in the context of macroeconomics problems, like the problem of unemployment, poverty, and inflation.

   

Positive Economics

1. These statements highlight the nature and extent of economic problems or analyze the economic behavior of the people related to the past, present, or future.

2. These statements are based on facts and figures related to the past, present, or future.

3. These statements are verifiable for truth.

4. These statements do not reflect any value judgment or opinion of economics.

Normative Economics

Normative economics is the economics of 'what ought to be'. It deals with the 'opinions' of the economists related to economic issues or economic problems.

Characteristics of Normative Statements-

1. These statements involve value judgment.

2. These statements lead to controversies and debates.

3. These statements indicate opinions and are, therefore, not verifiable for truth.

4. These statements reflect 'what ought to be', as a solution to economic problems.

What is An Economy?

The economy is a system by which people of an area earn their living.

What is An Simple economy?

A simple economy is the one in which the degree of interdependence and exchange is of a moderate degree.

Simple Economy v/s Complex Economy

Simple Economy	Complex Economy
1.     Income level of the people is low.	1.     Income level of the people is high.
2.Wants are multiple but not so enormous.	2.     Wants are multiple as well as enormous.
3.Mutual interdependence is limited.	3. Mutual interdependence is very high.
4. Degree of exchange is moderate.	4. Degree of exchange is very high.

       Type of Economic

Controlled or Centrally Planned Economy	Free Economy or Market Economy	Mixed Economy
1.     These are the economies where the economic activities, consumption, investment, are firmly controlled by the government or some central authority.	1.     These are the economies where the economic activities are controlled by the market forces.	2.     These are the economies where the economic activities are governed by the free play of market forces but are regulated by the government.
3.     Economic decisions are driven by the motive of social welfare.	2.     Economic decisions are driven by the motive of profit maximization.	3.     Economic decisions are driven by the motive of both profit maximization and social welfare.
4.     The consumer is not sovereign.	4.     The consumer is sovereign. The consumer buys goods according to his choice.	3. The consumer is sovereign. However, PDS(Public Distribution System) ensures the supply of essential goods to the consumer.
5.     Most resources are controlled by the government. The government decides at what price the goods are to be sold in the market.	5.     Most resources are controlled by the people. The market determines the prices of goods and services.	4. Resources are controlled both by the government and by the people. Prices are determined by the market. But, the government regulates/controls the price of essential goods.
6.     Public sector dominates the economic activity.	5. Private sector dominates the economic activity.	5. Both publi8c and private sectors dominate the economic activity.