Introduction to Economics (Micro Economics)

This presentation provides an introductory overview of Micro Economics. It defines economics, highlights its relationship with other social sciences, and delves into the meaning, nature, and scope of Micro Economics. It includes distinctions between Micro and Managerial Economics, the limitations of Micro Economics, and its features such as price theory and the marginalism principle. The presentation aims to provide a foundational understanding of Micro Economics, focusing on individual economic units like consumers and firms.

1. Micro Economics- I Unit 1: Definition of Economics Economics and Relation with other Social Sciences Meaning of Micro Economics Distinction between Micro and Managerial Economics. Nature and Scope of Micro Economics Limitations of Micro Economics

2. Definition of Economics Derived from Greek words i.e. oikos (house) and nemein (to manage) It means to fulfil our infinite needs and limited resources. Adam Smith (Wealth Oriented) : Economics is the Science of Wealth and creation of Nation’s Wealth Alfred Marshall (Welfare Oriented): Economics is the study of welfare of the individual and society through economic resources.

3. Economics and Relation with other Social Sciences Economics Psychology 1. Concerned with consumption, production and resource use by society. 2. Concerned with making financial house hold decisions with limited resources. 1. Concerned in what motivates the people to take a certain action. 2. Concerned with how humans behave while taking financial decisions. Economics Sociology Interested in organized activities which are related to production and consumption. Interested in organizing human activities and their functioning. Economics Statistics Research economic aspects to help in decision making. Used to provide data for economic Research

4. Meaning of Micro Economics Micro means small part of a thing. It studies economic behaviour of individual units such as individual consumer, individual producer or firm. Definitions: Maurice Dobb: “Micro Economics is in fact a microscopic study of economy.” Prof A.P Lerner: “Micro Economics consist of looking at the Economy through A microscope as it were to see how many millions of cells in the body of economy - the individuals or households as customers and individuals or firms as producers play their part in the working of the whole economic organism”.

5. Features of Micro Economics Study of Individual Units. Price Theory Partial Equilibrium i.e. isolates individual unit from other forces and studies it independently Laissez-Faire Policy: ideal condition where there is perfect competition and full employment. Slicing Method. Marginalism Principle: change brought in total by additional unit.

6. Nature of Micro Economics Related to an Individual Practical in nature Descriptive Conceptual (Demand, Supply, Utility) Aims to solve Problems. Uses Statistics for Reserch

7. Scope of Micro Economics Demand Analysis Price Determination Economic Welfare Capital Management Decision Making Estimating Demand Forecasting of Demand Market Analysis Determination of cost of a commodity Efficiency in consumption and production and overall economic efficiency of consumer Management of Capital and distribution of factors of Production i.e. land labour capital and entrepreneur. Helps in taking Marketing, Investment, Production, Cost and personal decision in a business

8. Limitations of Micro Economics Unrealistic assumptions as there is assumes there shall be existence of perfect competition and full employment which cannot happen. Ignores Aggregate aspects as only considers individual. Misleading as though it says its studying entire economy but actually it only studies individual. Scope is narrow. Excessive Generalizations.

9. Distinction between Micro and Managerial Economics Micro Economics Managerial Economics. Micro Economics means study of Individual and related. Only studies single units Involves Individual as well as business. Positive in Nature. i.e. what exists actually Managerial Economics means management of the factors of production i.e. land, labour, capital and entrepreneur. Applies theories and tools to achieve Normative End. (Ideal: Ought to be ). Only consider business. Normative in Nature i.e. what ought to be.

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