class 12 economics Meaning of micro economics.

 Meaning of micro economics..... Short and easy notes for board exam.

#1. What is economic activity? What are its kinds?
=> Economic activity are those which generate income and provide satisfaction to the human wants. In other word, that activity is economic activity which are related with the use of limited resources to satisfy unlimited human wants.

Following are its kinds;

• Consumption- Consumption are those economic activity which are consumed by the consumer to satisfy his Individual or collective wants.
• Production- production are those economic activities which are adding the value or price of the goods and services.
• Exchange- Exchange are those economic activity in which goods and services are bought or sold, and this transaction made in money. It is also known as price determination.
• Investment- in which production of capital goods, to produce various goods and services in future.

#2. "Economics is a positive science or normative science" discuss.

=> positive science is a science in which we show the relation between cause and effect. Every branch of economics establish a relation between cause and effect.

For example;

• Consumption- law of diminishing utility establish relation between rising consumption and diminishing utility.
• Production- it shows rising Input and their diminishing productivity.
• Exchange- Rise in price and decrease in demand and vice versa.
• Distribution- increase in supply, decrease in price.
• Public Finance- increase the tax, decrease the consumption.

                          All the above facts shows the relation between cause and effect. Normative science is related with the aspect "What ought to be". In normative science, it finds the problem and give suggestion to remove it.

                            Economics can neither be linked alone with positive science nor alone with normative science, both features are present in economics. According to Friedman, Economics is sometimes positive science and sometimes normative science.

#3. What do you mean by micro economics? What are its characteristics?

=> micro means small, derived from Greek word Mikro. It includes all activity which are related to one consumer, one producer, one firm, one industries.

Following are its characteristics;

• It study individual unit, income of one consumer, production of one industries, consumption of one person, etc.
• It study micro variable such as one firm, one industries.
• In micro economics, price determined under the theory of demand and supply.
• It is also known as price theory.
• It is based on assumption of full employment.

4. What do you mean by Macro economics? What are its characteristics?

> macro means large, it is also a Greek word Makro. It deals with aggregate such as National income, aggregate demand, aggregate supply and general price level.

Following and its characteristics; 

• It deals with the Macro unit of the economic.
• Macroeconomics study the policy related to the whole.
• It study macro variable.
• Its important tools are fiscal policy, monetary policy and income policy.
• It is also known as income and employment theory.

 

5. Between microeconomics and macroeconomics.

Microeconomics;

• It study micro variable.
• It is based on assumption of full employment.
• It is comparatively easy.
• Its main instrument are demand and supply.
• It is also known as price theory.
• Branches of microeconomics are law of demand, Production and cost theory and factor pricing theory.

Macroeconomics;

• It deals with aggregate economics.
• It is based on assumption of Under full employment.
• It is comparatively complex.
• Its main instruments are aggregate demand and aggregate supply.
• It is also known as income and Employment theory.
• Branches of macroeconomics are general price theory, inflation, income and Employment theory.

6. Write the importance of microeconomics.

> Following are its main importance;

• Knowledge of individual unit is necessary for economic analysis of entire economic.
• Helpful in determining economic problems.
• Helpful in policy formulation by government.
• Helpful in understanding the problem of various branches of applied economics.
• Helpful in solving the economic problem of capitalist economy.

7. Write the importance of macroeconomics.

> following are its main importance;

• Macroeconomics essential for formulation various economic policies.
• Macroeconomics help in providing basic raw material in the study of economic growth.
• Consumption in an economy are study to calculate the economic growth of the nation.
• All policies are framed by the government on the basis of macroeconomics.
• International comparison are possible under macroeconomics.

POINTS;

• Micro economics includes individual unit, small unit, individual price determination, individual family, individual firm, individual industries.
• Macroeconomics include national income, full employment, Total production, general price level.
• Consumer behaviour studies in microeconomics.
• Factor of production are land, labour, capital and entrepreneur.
• Micro means small, belonging to Greek word.
• Macro means large, belonging to Greek word.
• According to Ragnar  Frish, Economy are divided into two branches: 

        (A) Micro economy     (B) Macro economy

• According to Adam Smith, economics are the science of wealth.
• According to Marshall, economic is the science of human welfare.
• Adam Smith was the father of the economy.
• Trade cycle comes under the scope of macroeconomics.
• According to Robbins, economic is the science of choice.
• All activity which generate income or satisfy human wants are economic activity.
• Subject, which are matter of Economics:

         (A) wants are unlimited   (B) means are limited

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