Microeconomics is the study of individuals, households and firms' behavior in decision making and allocation of resources. It generally applies to markets of goods and services and deals with individual and economic issues.

1. COMPLIED BY
DR.S.VISHNU SUBA
ASSIST PROF OF ECONOMICS

2. Unit - I :
DEFINITIONS OF ECONOMICS AND BASIC CONCEPTS
Wealth – Welfare – Scarcity – Growth Definitions– Positive or
Normative
Science – Deductive and Inductive Analysis – Basic concepts:
Utility, Goods, Wants, Value, Price, Market and Income.

4. ECONOMICS :
• Economics studies how man utilises his limited resources for
the satisfaction of his unlimited wants.
• Economics is a social science concerned with the production,
production, distribution, and consumption of goods and
services. It studies how individuals, businesses,
governments, and nations make choices about how to
allocate resources..

5. • Modern Economist Divide the Subject as
1. Microeconomics
2. Macroeconomics
These Two terms Coined By Ragnar Frisch I the year 1920.
Microeconomics
•The term Microeconomics is derived from the Greek
word“MIKROS” which means Small.
•In microeconomics attention is concentrated on a very small part
of
Individuals

6. Features of Microeconomics :
1. Study of Individual aspects.
2. Use of Partial Equilibrium.
3. Price theory.
4. Study of isolated Variables.
5. Unrealistic assumptions.

7. Definitions of Economics :
Some of theimportant definitions of economics are those of leading
economics like
Adam Smith-'Wealth'(1776)
Alfred Marshall- 'Welfare' (1890)
Lionel Robbins - 'Scarcity' (1932)
Paul Samuelson -'Growth'(1948)
Adam smith's (Wealth definition) :

8. Adam Smith : (1723-1790)
 Scotfish economist, philosopher.
 Father of economics.
 His books “The Theory of Moral Sentiments(1759)”.
 “An Inquiry into the Nature and causes of the Wealth of Nations”
(1776).
 Classical Economists.

9. Definition :
 Adam Smith defined, “Economics is the Science of wealth”.
 Adam Smith stated, “Economics is concerned with an inquiry into the
nature and causes of wealth of nations, and it is related to the laws of
production, exchange, distribution and consumption of wealth”.
 The term 'Wealth' has a special meaning in economics.

10. Criticisms :
 This definition laid too much emphasis on wealth and did not consider human
welfare.(materialistic concept)
 The definition of wealth is not very clear. Non- material goods were not included.
 Non- material goods such as services of teachers, doctors are not considered.
 This definition is too narrow, it does not consider the major problems forced by the
the society.
 Smith's definition ignores the two most important concepts of economics.
i.e; Scarcity and Choice .

11. Alfred Marshall's Welfare Definition :
 Alfred Marshall (1842-1924) wrote a book principles of
economics in 1890.
 He defined economics as 'a study of mankind in the ordinary
business of life'.
 An alfred from of this definition is 'Economics is a study of
man's actions in the ordinary business of life'.
 Marshall agress that economics studies about wealth. but he
does not accept the view that economics studies about
wealth alone.
 Economics is on the one side a study of part of the wealth.

12.  Another more important side, ' a study of man.man is the centre of his study'.
 Marshall said that, Wealth is only Secondary thing, Man and his ordinary
business of life is the primary object of economics study.
 Marshall's definition of economics because of its emphasis on welfare.
Criticism:
Lionel Robbins is a reat critic of this definition.
1. The definition of Marshall, in economics we should consider only those
activities which promote material welfare but many activities do not promote
welfare but are rightly considered as economic activity.
2.Some activites promote welfare but not material welfare.
 Ex, the activities of doctors, lawyers, actors promote of material goods.

13.  But their labour does not result inthe production of material goods.
3. Marshall's definition is classificatory.it is not analytical.
It considers the production of material goods alone as economic activity
(Cart,Chairs,Tables etc.).
4.It is rather difficult to measure welfare and some economics policies which
promote the welfare of some people may affect the welfare of others.
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14. 3) Scarcity Definition- Lionel Robbins(1932):
 This definition was put forward by Robbins.
 The most accepted definition of economics.In his book “An Essay on the nature
and significance of economic science”.
 According to Robbins, “Economicis the science which studies human bahaviour
as a relationship between ends and scarce means which have alternative uses”.
Features :
 Human wants are unlimited
 Alternative use of scarce resources
 efficient use of resources
 Best allocation of resources.

15. Criticisms:
 1)His definition places too much emphasis on 'inividual' choice.
 'Scarcity' problem, in the ultimate analysis is the social problem- not
individual problem.
 Social problems give rise to social choice.
 Robbins could not explain social problems.
2) This definition, the root of all economic problems is the scarcity of
resources, without having any human touch.

16. 3) Robbins considered economics turned to be a more price theory or micro
economics theory.
He ignoreed other important aspects of economics like national income,
employment etc.