📘 Class 12 Microeconomics Notes

Chapter 1: Introduction

1. What is Microeconomics?

• Microeconomics is the branch of economics that studies the behaviour of individual economic units – like a consumer, a firm, or an industry.

• Focus: How decisions are made regarding consumption, production, and pricing under conditions of scarcity.

2. Central Problems of an Economy

Arises due to scarcity of resources:

1. What to produce?

   • Choice of goods: consumer vs capital, necessities vs luxuries.

2. How to produce?

   • Choice of production technique:

     • Labour-intensive (using more labour).

     • Capital-intensive (using more machinery).

3. For whom to produce?

   • How output is distributed among rich and poor.

3. Basic Economic Terms

• Resources: Inputs used in production (land, labour, capital, entrepreneurship).

• Scarcity: Limited availability of resources vs unlimited wants.

• Choice: Selection among alternatives due to scarcity.

4. Positive vs Normative Economics

• Positive Economics: Deals with facts (what is).

  • Example: “Unemployment rate in India is 8%.”

• Normative Economics: Deals with value judgments (what ought to be).

  • Example: “Govt. should reduce unemployment.”

5. Micro vs Macroeconomics

• Microeconomics: Individual behaviour (price of one product, demand of one consumer).

• Macroeconomics: Aggregates (national income, general price level, employment).