Key Notes - Introduction Micro Economics | Economics for Grade 11 PDF Download

Economics:

• The word Economics is derived from the Greek word ‘Oikonomia’ which means ‘household Management’.
• In early days Economics was known as political economy.
• Adam Smith is considered as the father of Economics.
• Alfred Marshall for the first time used the term Economics instead of ‘political economy’.
• The following table shows the important definitions in Economics.

Branches of economics. Economics is broadly dived into two branches. They are the following.
Micro Economics: It is the branch of Economics which deals with individual units.

• It is also called price theory, demand theory, cost theory etc.

Macro Economics: It is another branch of Economics which deals with aggregates.

• John Maynard Keynes is considered as the father of Macro Economics.
• It is otherwise called income theory.
• The main difference between MICRO and MARCO Economics are the following.

Prepare A Seminar Paper on Central Problems of an Economy: 

• Human wants are unlimited.
• Resources are limited
• Resources have alternative uses. In my seminar paper, I would like to present the Central problems of an economy.

Introduction: 

• The resources available to the human are limited, but their wants are unlimited.
• Due to the scarcity of resources, the economy faces the problem of choice.
• This mismatch between unlimited wants and limited resources that gives rise to three Central problems faced by every economy.

Contents:

• Every society wants thousands of goods and services.
• Since resources are scarce, all these goods and services cannot be produced.
• So if has decide to what type goods are produced.

Q: How to produce:
Ans: 

• It is the problem related with the technique of production.
• There are two techniques of production — Labour intensive and Capital intensive.
• Labour intensive is a production technique, which uses more amount of labour and less amount of capital.
• Capital intensive is a production technique, which uses more amount of capital and less amount of labour.

Q: For whom to Produce:
Ans: 

• It is the problem related with distribution.
• It means distribution of output among the factors of production.
• This is called functional distribution.

Conclusion: 

• Thus it can be concluded that every economic system faces three basic economic problems.
• Solution of these economic problems depend upon the Nature of the economic system.

Production Possibility Curve or Production Possibility Frontier

• It is defined as the locus of points of two goods which an economy can produce with the available resources and the given level of technology. The following is a PPC.
• In the above PPC, OX axis OY axis represents quantities of GOOD 1 and GOOD 2. A,B,C and D are the different production possibilities.

Production Possibility Set: 

Opportunity Cost 

Marginal Opportunity Cost

• In other words it is the ratio between ∆X and ∆Y.

MOC= ∆Y/∆X

• ∆Y = change in the quantity of good Y
• ∆ X = change in the quantity of good X
  • There is an important relationship between MOC and PPC.
  • If the MOC increases, PPC become Concave in shape.
  • If the MOC decreases, PPC become Convex in shape.
  • If the MOC, constant PPC become a straight line in shape.
  • This can be illustrated with the following table.