0% found this document useful (0 votes)
67 views63 pages

Introduction To Microeconomics

GRADE 11
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
67 views63 pages

Introduction To Microeconomics

GRADE 11
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 63

Microeconomics

INTRODUCTION
Commerce Batch 2023-2024
Our
SPEAKERS
01 Angel

02 Rishi

03 Aditi

04 Janki
The team

Angel Angel Aditi Kushwaha Rishi Raj Janki C Limbani


FUTURE ARTIST WANNABE CA YOUTUBER ASPIRING PSYCHOLOGIST
Introduction
WHAT IS AN ECONOMY?
An economy is a system which
provides people, the means to work
and earn a living

vital process of an economy

1. Production
2. Consumption
3. Investment or Capital Formation
Scarcity
Scarcity refers to the limitation if supply in relation to
demands for the commodity

scarcity is not only the problem of environment

1.Alternative resource means that a resource can be put


in other uses also.
2. Limitation of resources is not the only problems.
3.For examples- petrol,fuel,generators generators etc.
Economic problems
Economic problems is problem of choices
involving satisfaction of unlimited wants
instead of limited wants having alternative
uses.

There are total 3 reasons of economic problems

1.scarcity of resources
2.unlimited human wants
3.Human wants also differ in priorities
4.Alternative Uses
DIFFERENCE BETWEEN
POSITIVE ECONOMICS AND
POSITIVE ECONOMICS
Question 1

1.
Question 2

2.
Question 3

3.
Opportnity
COST
microeconomics
AND MACROECONOMICS
MICROECONOMICS
[ PRICE THEORY ]
Adam smith is considered to be the founder of
the field of microeconomics. the term 'micro' has
been derived from a greek word 'mikros' which
means small. Microeconomics deals with analysis
of behaviour and economic actions of small and
individual units of the economy.
Example- individual income individual output
etc...its main tools are demand and supply
MACROECONOMICS
[INCOME THEORY]
The term macroeconomics has been derived
from the greek word 'makros' which means
large. It deals with the overall performance
of the economy like inflation, unemployment
etc....
It studies the behaviour of aggregates of
the economy as a whole
INTERDEPENDENCE OF
MICROECONOMICS AND
MACROECONOMICS
Economics is a single subject and the analysis
of an economy cannot be split into
compartments. It means microeconomics and
macroeconomics are 'interdependent'
central problems
OF ECONOMY
Production, distribution and disposition of
goods and services are the basic economic
activities of life. every society has to face
scarcity of resources because of this every
society has to allocate the scarce resources.
which leads to central problems faced by
every economy

1.What to produce
2.How to produce
3.for whom to produce
ALLOCATION OF
RESOURCES
Allocation of resources refers to the
problem of assigning the scarce resources
in such a manner so that maximum wants of
the society are fulfilled. it is studied under
3 heads -

1.What to produce
2.How to produce
3.for whom to produce
1.WHAT TO PRODUCDE
This problem involves selection of
good and services to be produced
and the quantity to be produced
of each selected commodity.

The problem of what to produce has 2 aspects -


* WHAT POSSIBLE COMMODITIES TO PRODUCE: An economy has to decide
which consumer goods[rice,wheat etc] and which capital goods [machinery
etc]are to be produced in the same way choice between civil goods and war
goods

* HOW MUCH TO PRODUCE- after decidig the goods to be produced economy


has to decide the quantity of each commodity, that is selected. it means it
involves decision regarding quantity to be produced, of consumer and capital
goods, civil and war goods etc..
2.HOW TO PRODUCE
This problem refers to the selection of
technique to be used for production of
goods and services.A good can be produced
using different techniques of production.
techniques are classified as -

*In LABOUR INTENSIVE TECHNIQUE [ LIT ] :-more labour and less


capital (in the form of machines etc) is used.

*In CAPITAL INTENSIVE TECHNIQUE [CIT] : there is more capital


and less labour utilization.

The selection of technique is made with a view to achieve the objective of


raising the standard of living of people and provide employment to everyone
3.FOR WHOM TO PRODUCE
This problem relates to the distribution of produced goods
and services among the individuals within the economy i.e
selection of category of people who will ultimately
consume the goods.
*this problem is concerned with distribution of income
among the factors of production [ land, labour, capital ]
who contribute in the production process.

*PERSONAL DISTRIBUTION- it means how national income of


an economy is distributed among different people or groups

*FUNCTIONAL DISTRIBUTION - it involves deciding the share


of different factors of production in the total national
product of the country
-LET US ELABORATE THEIR
INTERDEPENDENCE WITH SOME
EXAMPLES
1.MICROECONOMICS DEPENDS ON MACROECONOMICS
-Law of demand came into existence from the analysis
of the behaviour of a group[ aggregate] of prople

-price of a commodity is influenced by general price


level prevailing in the economy

2.MACROECONOMICS DEPENDS ON MICROECONOMICS

-national income of the country is nothing but the sum


total of incomes of individual units of the country

aggregate demand depends on demand of individual


households of the economy.
Question 1

1.
Question 2

2.
Question 3

3.
Opportnity
COST
OPPOURTUNITY COST
Opportunity Cost is the cost of the next best
alternative foregone.
The amount of other goods and services, that
must be sacrificed to obtain more of any good,
is called the oppourtunity of that good.
Production Possibility
FRONTIER (PPF)
PRODUCTION POSSIBILITY
FRONTIER (PPF)
PPF refers to a graphical representation of all
the possible combintions of two goods that can
be produced with the given resources and
technology.
ASSUMPTIONS FOR PPF
1. Amount of resources in an economy is fixed
2. Only two goods can be produced
3. Resources are fully and efficiently utilised
4. Resources are not equally efficient in production
of all products
5. The level of technology is assumed to be
constant
PRODUCTION POSSIBILITY SCHEDULE
MARGINAL OPPORTUNITY
COST (MOC)
MOC refers to the number of units of a
commodity sacrificed to gain one additional
unit of another commodity.
MOC is always increasing
Productivity and efficiency of factors of
production decreses as they are shifted from
one use to another
MARGINAL RATE OF
TRANSFORMATION (MRT)
MRT is the ratio of number of units of a
commodity sacrificed to gain an additional
unit of another commodity.
Example: 20 units of guns and 1 unit of butter
(i.e 20G + 1B) can be produced by utilising the
resources fully and efficiently.
CHARACTERISTICS OF
PROPERTIES OF PPF
The two basic characteristics are:
1. PPF Slopes Downwards
2. PPF is Concave Shaped
As resources are transferred from one good to
another, less and less efficient resources have to
be employed.
WHETHER ECONOMY WILL
ALWAYS OPERATE ON PPF?
PPF only shows the maximum available possibilities, which an
economy can produce.

1. Economy will operate on PPF


2. Economy will operate at any point inside PPF
3. Economy cannot operate at any point outside PPF
It means:
Economy can either operate on PPF or inside PPF, known as
'Attainable Combinations".
But, economy cannot operate outside PPF, known as 'Unattainable
Combinations'.
Question 1

1. Which of the following illustrates a decrease in the


unemployment using the PPC?

(a) A movement down along the PPC

(b) A rightward shift of the PPC

(c) A movement from a point on the PPC to a point inside the


PPC

(d) A movement from a point inside the PPC to a point towards


the PPC
Question 1

1. Which of the following illustrates a decrease in the


unemployment using the PPC?

(a) A movement down along the PPC

(b) A rightward shift of the PPC

(c) A movement from a point on the PPC to a point inside the


PPC

(d) A movement from a point inside the PPC to a point


towards the PPC
Question 2

2. Which of the following movements


would represent economic growth?

(a) From U to Z
(b) From U to Y
(c) From Z to V
(d) From X to Z
Question 2

2. Which of the following movements


would represent economic growth?

(a) From U to Z
(b) From U to Y
(c) From Z to V
(d) From X to Z
Question 3

3. All of the following are part of the opportunity costs of


going to college EXCEPT

(a) The money spent on tuition

(b) Foregone wages given up to attend college

(c) Money spent on clothes

(d) Interest payments on student loans


Question 3

3. All of the following are part of the opportunity costs of


going to college EXCEPT

(a) The money spent on tuition

(b) Foregone wages given up to attend college

(c) Money spent on clothes

(d) Interest payments on student loans


Question 4
The graph here shows the production possibilities of two goods, R and S.

4. How does the opportunity cost of


Good R change as output of S increases?

(a) It is constant
(b) It is zero
(c) It decreses
(d) It increases
Question 4
The graph here shows the production possibilities of two goods, R and S.

4. How does the opportunity cost of


Good R change as output of S increases?

(a) It decreases
(b) It is zero
(c) It is constant
(d) It increases
Attainable and
UNATTAINABLE COMBINATIONS
ATTAINABLE
COMBINATION
It refers to those combinations at which economy can operate.
There can be two attainable options:
1) Optimum utilisation of resources:
2)Insufficient utilisation of resources
UNATTAINABLE
COMBINATION
An economy can never operate at any point outside the PPF (like X).
With the given amount of available resources, it is impossible for the
economy to produce any combination more than the given possible
combination.
PPF AND MRT
We can measure MRT on the PPF. The slope of PPF is a measure of the
MRT.
Since the slope of PPF curve increases as we move downwards along
the curve, the MRT also rises as we move downwards along the curve,
the MRT also rises as we move downwards along the curve.
CAN PPF BE A
STRAIGHT LINE?
PPF can be a straight line if we assume
that MRT is constant i.e., same amount
of a commodity is sacrificed to gain an
additional unit of another commodity.
CAN PPF BE A CONVEX
TO THE ORIGIN?
PPF can be convex to the origin if the MRT is decreasing,
i.e., less and less units of commodity are sacrificed to
gain an additional unit of another commodity.
PPF OF OPPORTUNITY
COST
The slope of the PPF indicates the opportunity cost of
producing one good versus the other good, and the
opportunity cost can be compared to the opportunity
costs of another producer to determine comparative
advantage.
CHANGE IN PPF
PPF is based on the assumption, that resources of an economy are fixed.
Changes in the resource availability lead to change in PPF. The change in PPF
indicates either an increase or decrease in the productive capacity of the
economy.
The change in PPF can be of two types:
1. Shift in PPF
2. Rotation of PPF
SHIFT IN PPF
The PPF can shift either towards right or towards left, when there is change in the resources or technology with
respect to both the goods.
1. Rightward Shift in PPF: When there is advancement or upgradation of technology and growth of resources.
2. Leftward Shift in PPF: When there is technological degradation and decrease in resources.
ROTATION IN PPF
It happens when there is a change in the productive capacity with respect to only one good.
1. Rotation of commodity on the X-axis: When there is a technological improvement or an increase in resources
for production of the commodity on X-axis.
2. Rotation for commodity on the Y-axis: When there is a technological improvement or an increase in resources
for production of commodity on Y-axis.
Unattainable Point
Inward Shift

Outward Shift
Attainable Point
Question 1
A lot of people died and many factories were destroyed in an
earthquake. How will it affect the PPF of the economy?
Question 1
A lot of people died and many factories were destroyed in an
earthquake. How will it affect the PPF of the economy?

PPF of the economy will shift to the left. It happens because


combinations available with the economy has decreased,
due to destruction in the resources in the economy.
Question 2
Massive unemployment will shift the PPF to the left.
Defend or refute.
Question 2
Massive unemployment will shift the PPF to the left.
Defend or refute.

The given statement is refuted. Massive unemployment does not


decrease the capacity of the economy to produce. So, there will
be no shift of PPF. However, economy will operate at some point
inside the PPF, due to unutilisation of human resources.
Question 3
On the basis of given diagram, answer the
following questions:
Question 3
On the basis of given diagram, answer the
following questions:
1. On the PPC AE, if the economy decides to
produce 50 million tonnes of wheat, then how
many tanks it can produce?
2. If there is growth in resources, what will
happen to the PPC?
3. Which point in the diagram represents
underutilisation of resources?
4. Which of the points in diagram is an
unattainable combination?
5. Identify the point at which the economy will
operate if resources are fully and efficiently
utilised.
Question 3

1. Zero Tanks
2. PPC will shift towards right.
3. Point F
4. Point G
5. If the resources are fully and efficiently
utilizes, then economy can operate at any
point (like points A,B,C,D or E) on the PPC.
Thank you!

You might also like