INTRODUCTION TO

MICROECONOMICS
Presented by: Prachi Kanjani
 WHAT IS ECONOMICS?

Economics is a science that studies human

behavior which aims at allocation of scarce
resources in such a way that consumer can
maximise their satisfaction, producers can
maximise their profits and society can
maximise its social welfare.
 WHAT IS ECONOMIC PROBLEM?
An economic problem refers to any such problem
in the economy that is concerned with the
production of goods and services to satisfy the
unlimited wants of the economy through the
utilization of scarce resources. It arises due to the
following reason:
i. Scarcity of resources
ii. Alternative use of resources
MICROECONOMICS & MICROECONOMICS:

MACROECONOMICS Microeconomics is the study of

individuals, households and firms' behavior
in decision making and allocation of
resources

MACROECONOMICS:
Macroeconomics is a branch of economics
dealing with the performance, structure,
behavior, and decision-making of an
economy as a whole.
POSITIVE & NORMATIVE ECONOMICS
Positive Economics:
Positive economics deals with economic issues
related to past, present or future. It deals with
such economic situations which can be stufies
using facts and figures.

Normative Economics:
Normative economics deals with opinions of the
economist related to economic issues. Different
economists may offer different opinions on the
solution to an economic problem. Opinions
involve value judgment.
POSITIVE & NORMATIVE
ECONOMICS- THE DIFFERENCE
Positive economics deals with
economic issues related to past,
present or future.
Statements of poitive economic
relates to 'what was', 'whats is'
and 'what will be'.
Statements of positive economics
are not necessarily the statments
of truth. These may be true or
false.
Facts and figures are verifiable for
truth.
Positive economics doesn't
involve value judgement.
Normative economics deals with
opinions of the economists
related to economic issues.
Statements of normative
economics relate to 'what ought
to be'.
Normatic statements cnannot be
termed as true or false. These
statements involve judgment
only.
Normative statements are not
verifiable at all.
Normative statements involves
value judgments only
 1. Centrally Planned Economy:
These are the economies where the economic activities
are firmly controlled by the government or some central

TYPES OF authority. Economic decisions are driven by the motive

of social welfare. Example: China and Russia.

ECONOMIES 2. Market Economy:

These are the economies where the economic activities
are controlled by market forces. Economic decisions
are driven by the motive of profit maximisation.
Example: The USA and The UK.

3. Mixed Economy:
These are the economies where the economic activities
are governed by the free play of market forces but are
regulated by the government. Economic decisions are
driven by the motive of both profit maximisation and
social welfare. Example: India.