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1、UNIT- 1IntroductionWhat is microeconomics?Central problems of an economy, production possibility curve and opportunity cost.An economy is a system that provides people with the means to work and earn a living in the process of production.MICROECONOMICS_ It is that branch of economics theory which st
2、udies the behavior of individual economics units of the economy i.e. household, individual firms etc. MACROECONOMICS_ It is that branch of economics theory which studies economy as a whole and behavior of aggregates such as total output, employment level, and aggregates price level.ECONOMICS PROBLEM
3、_ it is basically the problem of choice which arises because of (1) Recourses are scarce.(2) Recourses have alternative uses.CENTRAL PROBLEM_ It is allocation of resources or making choices among alternative uses of scarce resources. All central problem of an economy arise due to scarcity of resourc
4、es having alternative uses. Three fundamental central problems are (1) What to produce (2) How to produce (3) For whom to produce These problems are solved through price mechanism in a capitalist economy and through central planning in a socialist economy.PRODUCTION POSSIBILITY CURVE- It is a curve
5、which depicts all possible combinations of two goods which an economy can produce with available technology and full and efficient use of recourses.OPPORTUNITY COST It is equal to the value of next best alternative forgone.MARGINAL OPPORTUNITY COST MOC of particular good is the amount of other good
6、which is scarf iced to produce an additional unit of that particular good. MOC is also called MARGINAL RATE TRANSFORMATION.Part A-Introductory MicroeconomicsUnit 1: IntroductionQ1 Why the problem of choice arises in an economy?Q2 What are the two factors which define scarcity?Q3 Why there is a need
7、for economising of resources?Q4 What do you mean by a production possibility curve?Q5 What role PPC has in solving central problems of an economy?Q6 Give a table showing the production of two commodities with the help of given resources? Q7 Draw a production possibility curve.Q8 What does a PPC show
8、?Q9 If we move from one point to another on PPC, what does it mean?Q10 Why the production at a point towards left hand side from PPC is not desirable?Q11 What do you mean by a point below PPC?Q12 How is it possible to increase the production of one commodity without sacrificing the production of oth
9、er commodity when all the resources are utilised fully?Q13 Why do growth of resources and technological advances shift PPC to the right?Q14 PPC shows the fuller utilisation of resources , then how is it possible to produce more with the help of same resources?Q15 What is the meaning of growth of res
10、ources?Q16 What is the role of improved technology on a production possibility curve?Q17 What do you mean by under utilisation of resources?Q18 If all the resources are not used fully to produce commodities , what is it called?Q19 Explain the meaning of shift of PPC towards right hand side.Q20 On wh
11、ich side PPC will shift due to growth of resources?Q21 How an economy decides that what all should be produced with the help of given resources ?Q22 In which direction PPC will shift due to a massive unemployment in the country ?Q23 If some producing units are destroyed because of earthquake in the
12、country, how will it affect the PPC ?Q24 If number of skilled labour increases in the country, how will it affect PPC ?UNIT IICONSUMERS EQUILIBRIUM WITH UTILITY APPROACH1. Utility. It is want satisfying capacity of a commodity.2. Total Utility. It is the sum total of utility derived from the consump
13、tion of all units of a commodity. TU = MU3. Marginal Utility. It is additional utility when one more unit of a commodity is consumed.MUn = TUn - TUn-1 or MU = TU Qx4. Law of Diminishing Marginal Utility. It states that marginal utility tends to diminish as more and more units of a commodity are cons
14、umed by a consumer.5. Consumers Equilibrium. It is defined as a situation when a consumer maximizes his satisfaction given income and prices.Equilibrium in case of one commodity X occurs where:MUx = MUM PxEquilibrium in case of two commodities X and Y occurs where :MUx = MUY = MUM Px PYOrMUx = Px =
15、MUY MUY PYsubject to PX.X + PY . Y = M6. Price Effect. Price effect (PE) is split into two effects Substitution Effect (SE) and Income Effect (IE). In case of inferior goods, SE is stronger than IE, thus demand curve is downward sloping. In case of giffen goods, IE is stronger than SE, thus demand curve is upward sloping.CONCEPT OF DEMAND1. The demand for a commodity is the quantity of the commodity which the consumer is willing to buy at a certain price during any particul
