NATURE AND SCOPE OF MICRO ECONOMICS

Ø  NATURE AND SCOPE OF MICRO ECONOMICS
MICRO ECONOMICS

Ø  SHASHI AGGARWAL ECONOMICS AND LAW CLASSES

• NATURE OF MICRO ECONOMICS

1. MICRO IS DERIVED FROM GREEK WORD”MIKROS” WHICH MEANS SMALL.
2. STUDY OF THE ECONOMIC ACTIONS OF INDIVIDUALS
3. MICRO MEANS MILLIONTH PART IT DEALS WITH SMALL PART OR SMALL COMPONENT OF THE ECONOMY
4. IT IS BRANCH OF ECONOMIC ANALYSIS WHICH STUDIES THE ECONOMIC BEHAVIOR OF THE INDIVIDUAL UNIT
5. IT IS TH STUDY OF ONE PARTICULAR UNIT RATHER THAN ALL THE UNITS COMBINED
6. IN MICRO ECONOMY WE STUDY THE TREE NOT THE FOREST

• DEFINITION
• LEFTWITCH,”MICRO ECONOMICS IS CONCERNED WITH ECONOMIC ACTIVITIES OF ECONOMIC UNITS AS CONSUMERS,RESOURCE OWNERS AND BUSINESS FIRMS.
• BOULDING,” MICRO ECONOMICS IS THE STUDY OF PARTICULAR FIRM,PARTICULAR HOUSEHOLD,INDIVIDUAL PRICE,WAGE ,INCOME,INDUSTRY AND PARTICULAR COMMODITY
• FEATURES OF MICRO ECONOMICS

1. NATURE OF ANALYSIS:-BEHAVIOR OF INDIVIDUAL CONSUMERS AND PRODUCER IN DETAIL IS ANALYSED. IT IS STUDY OF SUBJECT MATTER FROM PARTICULAR TO GENERAL
2. METHOD:-DIVIDES THE ECONOMY INTO VARIOUS SMALL UNITS AND EVERY UNIT IS ANALYSED IN DETAIL.
3. SCOPE:- IT INVOLVE PRODUCT PRICING,FACTOR PRICING AND THEORY OF WELFARE
4. APPLICATION: SIGNIFICANT FROM THEMATICALLY AND PRACTICAL ANGLE.HELPS IN FORMULATION RESOURCE ALLOCATION,PUBLIC FINANCE ETC
5. NATURE OF ASSUMPTION: OTHER THINGS REMAINING THE SAME

6. HOW A PARTICULAR FIRM MAXIMIZES THE PROFIT,CONSUMER MAXIMUM SATISFACTION ETC
7. AN IMPORTANT TOOL IS USED MARGINAL ANALYSIS
8. NEO CLASSICAL WRITERS WERE PREDOMINANTLY INTERESTED IN MICRO ECONOMIC ANALYSIS.IT IS CULMINATED BY MARSHALL

• ASSUMPTION

1. FULL EMPLOYMENT
2. ASSUMPTION OF OTHER THINGS REMAINING THE SAME

• SCOPE OF MICRO ECONOMIC THEORY
• SCOPE

1. THEORY OF CONSUMER’S BEHAVIOR:-STUDIES HOW AN INDIVIDUAL CONSUMER MAXIMIZES HIS SATISFACTION
2. THEORY OF PRODUCT PRICING:-HOW A PARTICULAR PRODUCT OR A FIRM MAXIMIZES HIS PROFIT OR MINIMIZES THE COST. THEORY OF PRODUCTION AND COST AND HOW  PRICE IS DETERMINED.
3. THEORY OF FACTOR PRICING: HOW THE FACTORS OF PRODUCTION ARE EMPLOYED AND REWARDED. HOW FACTORS OF PRODUCTION,LAND,LABOUR,CAPITAL,ENTREPRENEUR ARE REWARDED IN THE SHAPE OF RENT,WAGES,INTEREST AND PROFIT ETC
4. THEORY OF WELFARE:-

1. CONCERNED WITH THE QUESTION OF EFFICIENCY AND WELFARE IN ECONOMICS
2. ECONOMIC EFFICIENCIES :EFFICIENCY IN PRODUCTION,EFFICIENCY IN CONSUMPTION AND EFFICIENCY IN DISTRIBUTION
3. EFFICIENCY IN PRODUCTION MEANS : MAXIMUM OUTPUT AT MINIMUM COST
4. EFFICIENCY IN CONSUMPTION MEANS DISTRIBUTION OF GOODS AND SERVICES IN THIS MANNER TO OBTAIN MAXIMUM SATISFACTION
5. OVER ALL ECONOMIC EFFICIENCY MEANS PRODUCTION OF THE GOODS DESIRED BY THE SOCIETY
6. MICRO ECONOMICS SPELLS OUT THE CONDITIONS OF EFFICIENCY AND SUGGEST HOW THEY MIGHT BE ACHIEVED.