COMPETENT COMMERCE

CLASSES
By:-Rohit Maheshwari

CLASS-XI
SESSION-2023-24

ECONOMICS
By-Anubhav Awasthi

TOPIC- 1
INTRODUCTION
TO
MICRO-ECONOMICS
Student Name :-________________________
School:-______________________________
 PART - A
-Meaning of Economics:- Economics is a branch of Social Science under which
we study about rational management of scarce(limited) resources with the
purpose of satisfaction of unlimited human wants.
NOTE:- What is Economics all about?
Economics is all about making choices in presence of scarcity. It studies
human behaviour as a relationship between means(resources) and
ends(human wants).Economics aims to ensure that the resources are used in
the best possible manner.
-Branches of Economics:-
(a) Microeconomics- It is that part of economic theory ,which studies the
behaviour of individual units of an economy.
-“Micro” is an English word which is derived from a Greek term “Mikros” which
means ‘Small’.
-Its main tools are Demand & Supply .
-It is also known as Price Theory .
-For ex:- individual income , individual output , price of a commodity etc.
(b) Macroeconomics- It is that part of economic theory ,which studies the
behaviour of aggregates of the economy as a whole.
-“Macro” is an English word which is derived from a Greek term “Makros”
which means ‘Large’.
-Its main tools are Aggregate Demand & Aggregate Supply .
-It is also known as Income & Employment Theory .
-For ex:- national income , aggregate output , aggregate consumption etc.
-Economy:- An economy is a system which provides people , the means to work
and earn a living.
-Positive Economics(or science) :- Positive economics deals with what are the
economic problems and how are they actually solved.
- Positive economics studies the facts of life., it deals with ‘things as they are’.
- It can be verifies with actual data .
-For ex.:- -Price in Indian economy are constantly rising .
-India is worlds most populated country . etc.
-Normative Economics(or science) :- Normative economics deals with what
ought to be or how the economic problems should be solved.
- Normative economics tells us ‘what ought to be’.
- It can not be verified with actual data .
-It is based upon opinions.
-For ex.:- -India should take steps to control rising prices .
-India will make a law on population control. etc.
-Classification of Economy on the basis of ownership or control:-
1-Capitalistic or Market Economy:- it refers to an economy under which
means of production are owned , controlled and operated by the private sector . It
is also called Private Sector Economy.
2-Socialistic or Centrally Planned Economy :- It refers to an economy under
which means of production are owned , controlled and operated by the
Government . It is also called Public Sector Economy.
3-Mixed Economy :- It refers to an economy under which means of production
are owned ,controlled and operated by both Private and Public sector .
-Classification of Economy on the basis of development:-
1-Backward Economy:- In an backward / under-developed economy, the level of
real income and per capita income is usually very low. Consequently, the standard of
living is very low. The reasons for the condition is the lack of scientific and
technological application in productive processes and the shortage of capital. Most of
the countries in Asia, Africa and Latin America belong to this category.
2-Developing Economy:- The countries of such an economy are neither very
advanced nor very backward. Such countries are at present, engaged in making
maximum possible use of their resources of raw material, capital and manpower, so
as to accomplish rapid economic development. Our country is a good example of
developing economy.
3-Developed Economy:- The economy of a country, which has acquired very high
stage of development and where per capita income and standard of living is high, is
termed as developed economy.
-There are four Factors of production:-
1- Land (Got Rent) , 2-Labour (Got Compensation) ,
3-Capital (Got Interest) , 4-Enterpreneur (Got Profit)
Note:- When all four sectors of economy operates together in the production
process .Then such economy is known as Open Economy.
Whereas, when only two sectors i.e., Consumer and producer operated in
the production process.Then such economy is known as Closed Economy.
-Economic Problem:- It is a problem of choice involving satisfaction of
unlimited wants out of limited resources having alternative uses.
-There are three Economic Problems:-
1-Scarcity of Resources – Resources are limited in relation to their demand and
economy can’t produce all what people’s want.
2-Unlimited Human Wants – Human wants are never ending and differ in
priorities .This increases the use of resources that are already scarce .
3-Alternative uses of resources – Resources are not only scarce , but they can
also be put to various uses .Thus , economy has to make choice between the
alternative uses of the given resources .
-Central Problems of Economy:-
1-What to produce ? :- This problem involves selection of goods and services to
be produced and the quantity to be produced of each selected commodity.
It has two aspects-
(a) What possible commodities to produce ?
(b) How much to produce ?
2-How to produce? :- This problem refers to selection of technique to be used
for production of goods and services .
There are two techniques of production :-
(a) Labour intensive Technique (More labour less machinery)
(b) Capital intensive Technique ( Less Labour more machinery)
3-For whom to Produce? :- This problem refers to selection of the category of
people who will ultimately consume the goods, i.e., whether to produce goods for
more poor and less rich or more rich and less poor.
 PART B
-Production Possibility Curve (PPC) :- It refers to a graphical representation of
possible combinations of two goods that can be produced with given resources
and technology .
-Alternative names of PPC :- PPC is also known by following names-
a) Production Possibility Frontier (PPF)
b) Production Possibility Boundary (PPB)
c) Transformation Curve
d) Transformation Frontier
e) Transformation Boundary
-Assumptions of PPC:-
PPC is based upon following assumptions:-
1-The amount of resources in an economy is fixed .
2-With the help of given resources only Two goods can be produced.
3-The resources are fully and efficiently utilised .
4-The level of technology is assumed to be constant.
-Practical application of PPC using Table and Graph:-
Possibility Guns Butter MOC/MRT
(in units) (in units)

A 21 0 -
B 20 1 1
C 18 2 2
D 15 3 3
E 11 4 4
F 6 5 5
G 0 6 6
Explanation of graph:-
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-Characteristics of PPC:-
1-PPC slopes downwards :- PPC always slopes downward because there exist a
negative or inverse relationship between the two goods.
2-PPC is concave shaped :- PPC is concave shaped because of increase in MOC
i.e., more and more units of one commodity are sacrificed to gain an additional
unit of another commodity.
-Opportunity Cost :- It is the cost of next best alternative forgone .
-Marginal Opportunity cost / Marginal Rate of Transformation
(MOC/MRT):-
It refers to the number of units of a commodity sacrificed to gain one additional
unit of another commodity .In case of PPC MOC is always increasing ,i.e., more
and more units of a commodity have to be sacrificed to gain an additional unit of
another commodity .
MOC/MRT = Units Sacrificed
Units Gained
-Attainable and Unattainable combinations :-
(a) Attainable combinations :- It refers to those combinations at which
economy can operate. There can be two attainable options :-
I – Optimum utilisation of resources :- If the resources are used in the best
possible manner ,then economy will operates at any point on PPC.
II- Inefficient utilisation of resources :- However, the actual production can fall
short of its capabilities .If there is wastage of inefficient utilisation of resources ,
then economy will operate at any point inside the PPC.
(b)Unattainable combinations :-With the given amount of available resources ,
it is impossible for the economy to produce any combination more than the given
possible combinations i.e., an economy can never operates at any point
outside the PPC.
Space for Graph:-
-Change in PPC :-
1-Shifts in PPC The PPC either shifts towards left or right and this will happen
when there is change in productive capacity with respect to both the goods.
(a)-Rightward shift:- When there is advancement of technology or increase in
availability of resources in respect to both the goods ,then PPC will shifts
towards the right.
(b)-Leftward shift:- When there is a technological degradation or decrease in
availability of resources in respect to both the goods ,then PPC will shifts
towards the left.
-Space for graph:-

2-Rotation in PPC – PPC will rotate when there is change in productive

capacity with respect to only one good.
(a)-Rotation for commodity on the X-axis:- When there is advancement of
technology or increase in availability of resources for production of the
commodity on the X-axis ,then PPC will do forward rotation .
However,When there is a technological degradation or decrease in availability of
resources for production of the commodity on the X-axis ,then PPC will do
backward rotation .
(b)-Rotation for commodity on the Y-axis:- When there is advancement of
technology or increase in availability of resources for production of the
commodity on the Y-axis ,then PPC will do Upward rotation .
However,When there is a technological degradation or decrease in availability of
resources for production of the commodity on the Y-axis ,then PPC will do
downward rotation .
-Space for Graph:-
Space for Additional Notes :-
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