Chapter 1: Introduction | Ultra Revision – Detailed Notes prepared for MP Board & CBSE Board Exams

 

Author ✍️ R. Littey

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Class 12th – Economics (Microeconomics)
Chapter 1: Introduction has been explained in detail, point-wise, and as exam-oriented notes from the perspective of MP Board and CBSE Board examinations.

Class 12th Microeconomics Chapter 1: Introduction

1. Meaning of Economics

Economics is a social science that studies the relationship between unlimited human wants and limited resources. Human needs are unlimited, while resources are finite, which gives rise to the problem of Choice. This very problem is the core subject of Economics.

According to famous economist Lionel Robbins –
"Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses."

2. Central Problems of an Economy

(i) What to Produce?

• Which goods and services should be produced?
• Consumer goods or Capital goods?
• Example: More mobile phones or more agricultural equipment?

(ii) How to Produce?

• Labor-intensive technique or Capital-intensive technique?
• How to ensure efficient use of resources?

(iii) For Whom to Produce?

• Who will receive the distribution of produced goods?
• Consumers are decided based on income distribution.

📌 Exam Point: These three problems are found in every economic system (Capitalist, Socialist, Mixed).

3. Meaning of Microeconomics

Microeconomics is that branch of economics which studies small units of the economy. The word 'Micro' means small. The units of study include:

• Individual Consumer
• Individual Producer
• Firm and Industry
• Price of a commodity and Individual Income

4. Definitions of Microeconomics

(i) According to Prof. Marshall – "Microeconomics is the study where the price determination of a single commodity is analyzed."

(ii) According to Prof. Boulding – "Microeconomics studies the individual units of the economic system."

5. Scope of Microeconomics

The major subjects of Microeconomics are as follows:

1. Study of Consumer Behavior: Law of Demand, Utility, and Consumer Equilibrium.
2. Study of Producer Behavior: Production, Cost, and Supply.
3. Price Determination: Price of goods and price of factors of production (Land, Labor, Capital).
4. Types of Markets: Perfect Competition, Monopoly, Oligopoly.

6. Importance of Microeconomics

• Helpful in Price Determination.
• Helpful in the efficient use of resources.
• Assists the government in policy formulation (Tax, Subsidies).
• Useful for consumers and producers to maximize satisfaction and profit.

7. Difference between Micro & Macro Economics

Basis	Microeconomics	Macroeconomics
Scope of Study	Small Units	Whole Economy
Example	Price of one product	National Income
Approach	Microscopic	Aggregate/Broad

📌 Note: This difference is often asked for 3 or 5 marks in CBSE and MP Board exams.

8. Limitations of Microeconomics

• Neglects aggregate economic problems.
• Based on unrealistic assumptions like Full Employment.
• Focuses only on individual units.

9. Microeconomics and Resource Problems

Microeconomics clarifies that resources are limited and wants are unlimited. Therefore, choice is mandatory, and choice itself implies sacrifice (Opportunity Cost).

10. Exam Oriented Important Points

🔹 2 Mark Questions: Definition of Microeconomics, meaning of the word 'Micro'.
🔹 3–4 Mark Questions: Importance of Microeconomics, Difference between Micro and Macro Economics.

11. Conclusion

Microeconomics is the cornerstone of Economics. Without it, Macroeconomics cannot be imagined. It tells us how decisions are made at the individual level. This chapter is extremely important and scoring for both MP Board and CBSE Board students.

Best Wishes! Keep Studying Hard.

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