Showing posts with label 12th Economics Chapter No. 1 - Introduction to Microeconomics. Show all posts

Explain the importance of Macro economics.

1) Functioning of an Economy : Macro economic analysis gives us an idea of the functioning of an economic system. It helps us to understand the behaviour pattern of aggregative variables in a large and complex economic system.

2) Economic Fluctuations : Macroeconomics helps to analyse the causes of fluctuations in income, output and employment and makes an attempt to control them or reduce their severity.

3) National Income : Study of macro economics has brought forward the immense importance of the study of national income and social accounts. Without a study of national income, it is not possible to formulate correct economic policies.

4) Economic Development : Advanced studies in macroeconomics help to understand the problems of developing countries such as poverty, inequalities of income and wealth, differences in the standards of living of the people etc. It suggests important steps to achieve economic development.

5) Performance of an Economy : Macro economics helps us to analyse the performance of an economy. National Income (NI) estimates are used to measure the performance of an economy over time by comparing the production of goods and services in one period with that of the other period.

6) Study of Macro economic Variables : To understand the working of the economy, study of macro economic variables are important. Main economic problems are related to the economic variables such as behaviour of total income, output, employment and general price level in the economy.

7) Level of Employment : Macroeconomics helps to analyse the general level of employment and output in an economy.

Ch. No. 1 INTRODUCTION TO MICRO AND MACRO ECONOMICS

Introduction :

Q. 4. Answer the following :

1) Explain the features of Micro economics.

Explain the features of Micro economics.

1) Explain the features of Micro economics.

Features of Micro Economics :

1) Study of Individual Units : Microeconomics is the study of the behaviour of small individual economic units, like individual firms, individual price, individual household etc.

2) Price Theory : Microeconomics deals with determination of the prices of goods and services as well as factors of production. Hence, it is known as price theory.

3) Partial Equilibrium : Equilibrium is the balance between two factors. Micro economic analysis deals with partial equilibrium which analyses equilibrium position of an individual economic unit i.e. individual consumer, individual firm, individual industry etc. It isolates an individual unit from other forces and studies its equilibrium independently.

4) Based on Certain Assumptions : Microeconomics begins with the fundamental assumption, “Other things remaining constant” (Ceteris Paribus) such as perfect competition, laissez-faire policy, pure capitalism, full employment etc. These assumptions make the analysis simple.

5) Slicing Method : Micro economics uses slicing method. It splits or divides the whole economy into small individual units and then studies each unit separately in detail. For example, study of individual income out of national income, study of individual demand out of aggregate demand etc.

6) Use of Marginalism Principle : The concept of Marginalism is the key tool of micro economic analysis. The term 'marginal' means change brought in total by an ad

ditional unit. Marginal analysis helps to study a variable through the changes. Producers and consumers take economic decisions using this principle.

7) Analysis of Market Structure : Micro economics analyses different market structures such as Perfect Competition, Monopoly, Monopolistic Competition, Oligopoly etc.

8) Limited Scope : The scope of micro economics is limited to only individual units. It doesn’t deal with the nationwide economic problems such as inflation, deflation, balance of payments, poverty, unemployment, population, economic growth etc.