What is Economics and why micro and macro economics are useful for economic system

1. CONCEPT OF ECONOMICS
By
Dr. Raksha Singh
Principal
Shri Shankaracharya Mahavidyalaya
rakshasingh20@hotmail.com
www.ssmv.ac.in
Dr. Raksha Singh

2. ECONOMICS IS EVERYWHERE
 Economics- Managing household affairs
 You invest goods or resources- in expectation of a return
that is greater than your initial investment
WE ALL ARE PRACTISING ECONOMICS-Everywhere
 Small kids - crying
 Temple care taker
Dr. Raksha Singh

3. Why do many fast food restaurants promise a free
meal if you are not given a receipt at the time of
purchase?
•Question

4. Answer
 To make sure cashiers do not steal.
Sales are monitored when rung up.
 It is cheaper to give a free meal
than to hire supervisors to monitor
a cashier all day
Dr. Raksha Singh

5. ECONOMICS (vFkZ'kkL=)
 Economics is based on human behaviour
 The economist’s lab is the real world. They
don’t conduct controlled lab experiment .
 Economics is concerned with selection of
resources under conditions of scarcity
¼vHkko½
Dr. Raksha Singh

6. SCARCITY DEFINITION
According to Lionel Robbins “ Economics is the science
which studies human behavior as a relationship between
ends and scarce means which have alternative uses”
Definition exhibits following characteristics
Economics is a science-positive science
Economics studies human behavior
Ends
Scarce Means
Alternative uses of scarce means
Dr. Raksha Singh

7.  Scarcity: The root of all economic problems. It gives rise
to choice ¼fodYi½
 The limitation of supply in relation to demand for a
commodity
 Alternate uses of a commodity. Petrol is scarce but it
can be used in vehicle, generator, railway engines….
SCARCITY(vFkZ'kkL=)
Dr. Raksha Singh

8. CENTRAL PROBLEMS
OF AN ECONOMY
Central
Problems of
an Economy
Allocation of
Resources
Efficient Use
or Fuller
Utilisation of
Recources
Economic
Development or
Growth of
Resources
What to
Produce?
How to
Produce?
For Whom to
Produce?
Dr. Raksha Singh

9. CENTRAL PROBLEMS
First component of Problem of resource allocation
 What to produce
 Quantum of goods to be produced
 Whether good X or Y (based on maximof profit)
 Kinds of goods to be produced
(Consumer or Capital Goods)
 Consumer goods
 Single Use consumer goods – Bread & Butter
 Durable Use consumer goods- TV,AC
Dr. Raksha Singh

10. Conti..
Second component of Problem of resource allocation
 How to produce
 How to organise production it relates to choice of
technique of production
 Labour Intensive or Capital Intensive
 Pottery,SHG- pickles…
 Machine ,Tanks
Dr. Raksha Singh

11. Conti…
3rd component- Problem of resource allocation
 For whom to produce ?
 Affluent buyers centric or Deprived buyer centric- Produce
jewellery or wheat?
 The capacity to pay depends upon their level of income ,
this problem is concerned with Distribution of Income ¼
vk;dk forj.k½
 This problem can be categorised under two heads
 Personal Distribution ¼oS;fDrd forj.k½
 Functional Distribution ¼dk;kZRed forj.k½
Dr. Raksha Singh

12. ECONOMIC THEORY
 Prof. Ranger Frisch in twenties explained
Economic Theory in two ways
 1. Micro Economics
 2.Macro Economics
 Since then Economists used these two
approaches for economic analysis
Dr. Raksha Singh

13. MICRO ECONOMICS (lw{evFkZ'kkL=)
 Microscopic study of the national economy
 Scope of Micro Economics:
 It studies the economic behaviour of individual decision
making units
 Theory of product pricing
 Theory of consumer behaviour
 Theory of production and costs
Dr. Raksha Singh

14.  Theory of factor pricing or Distribution
 Studies theory of rent, wage, interests and profits
 Theory of economic welfare- sometimes referred as
price theory
MICRO ECONOMICS
(lw{evFkZ'kkL=)
Dr. Raksha Singh

15. MACRO ECONOMICS (O;kid vFkZ'kkL=)
• It is a branch of economics dealing with the performance,
structure, behaviour and decision making of an economy
• This includes regional, national and global economies
• This study aggregated indicators such as GDP, unemployment,
rates, national income, price indices
• Macro-economic models ¼O;kid&vFkZ'kkL=h; izfreku½ and their
forecasts are used by governments to assist in the
development and evaluation of economic policy ¼vkfFkZd uhfr½
Dr. Raksha Singh

16. MICRO ECONOMICS VS MACRO
ECONOMICS
Micro Economics Questions Macro Economics Question
What Determines the price of a cup
of tea at Nainital Lake?
What determines the overall level
of prices in the economy as a
whole?
What Determines the salary offered
by Jindal Steel to its new CEO?
What determines the overall salary
levels paid to workers in a given
year?
Go to job or Higher Education? How many people are employed in
the economy as whole?
What policies should be adopted to
make it easier for low-income
students to attend a college?
What policies should be adopted to
promote full employment and
growth in the economy as a whole?Dr. Raksha Singh

17. MICRO ECONOMICS VS MACRO
ECONOMICS
Dr. Raksha Singh

18. PRACTICE ¼vH;kl½
 Identify the following as Microeconomic study and
macroeconomic study:
a) Production of sugar mill
b) Inflation rate
c) Car industry
d) Supply of money
e) Wage determination in a company
f) Allocation of resources
g) Household expenditure
h) Aggregate demand
i) Foreign exchange rateDr. Raksha Singh

19. Answer
 micro economics-a,c,e,f,g
Dr. Raksha Singh

20. References
 https//www.canstockphoto.com. (2019, Dec). Retrieved
from https//www.canstockphoto.com
 https://www.shutterstock.com. (2019, March). Retrieved
from https://www.shutterstock.com
 https://www.tutorialspoint.com/indian_economy/indian_
economy_micro_economics.htm. (n.d.). Retrieved from I.C.
DIngra, V. (1997). Economics. Sultan Chand& Sons.
 Kar.lE.case, R. C. (2018). Principles of Economics. Pearson.
 SERIES, T. (2017). Economics. DANIKA publishing COmpany.
Dr. Raksha Singh

21. THANK YOU
Dr. Raksha Singh
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