INTRODUCTION TO MICROECONOMICS

By Satya Prakash Joshi

WHAT IS ECONOMICS?

• The study of how individual and society choose to utilize scare resources to satisfy unlimited human wants.

• These wants encompass all goods and services that individual desire, including food clothing, shelter and anything else that enhance the quality of life.

WHAT IS MICROECONOMICS?

• The term micro has been derived from Greek word “mikros”, which means small.

• Microeconomics is the study of the economy at the level of the individual.

• It also analyze the behavior of individual household, industries, markets, labor unions or trade associations.

INTRODUCTION CONTINUE…

• According to K.E Boulding, “ Microeconomics is the study of particular firms particular household, individual prices, wages, incomes, individual industries, particular commodities.

• Since microeconomics splits up the entire economy into smaller parts for the purpose of intensive study, it is also known as “Slicing Method”

FEATURES OF MICROECONOMICS

• It is individualistic economics

• It is concerned with the behavior of individual economics entities such as household, firms, market etc.

• It analyses economics phenomena under the ceteris paribus assumption and hence is a method of partial equilibrium analysis.

• It is also called “price theory” or “value theory”

• It’s objective is to analyze the process by which scare resources are allocated among alternative uses.

SCOPE OF MICROECONOMICS

• Theory of demand

• Theory of production

• Theory of product pricing

• Theory of factor pricing

• Theory of economics welfare

TYPES OF MICROECONOMICS

•Micro Static

•Comparative Micro Static

•Micro Dynamic

MICRO STATIC• Micro static is the study of static

relationship between different microeconomic variables.

• It deals with the final position of the equilibrium of these variables at particular point of time.

• i.e micro static analyses the condition of equilibrium price of a commodity at a particular point of time.

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COMPARATIVE MICRO STATIC

• Is concerned with a comparative study of different equilibrium positions at different points of time.

• It does not deals with the transitional period involved in the movement from one equilibrium position to the other.

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MICRO DYNAMICS

• Micro dynamics analyses the process by which the system moves from one equilibrium point to another.

• It explains the happening in the market during the period of transitions from one equilibrium point to another.

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USAGES OF MICROECONOMICS

• Helpful to understand the working of the economy

• Helpful to provide tools for economics policies

• Helpful in formulating sectorial policies

• Helpful in efficient allocation of resources

• Helpful in the study of human behavior

• Helpful in business decisions• Optimal resource allocation, Demand analysis, Cost

Analysis, Pricing policy, Optimal production decision