Q. 1. What is economics?
Ans. Economics is a subject matter that deals with economic problems related to human life.
Q. 2. Define micro-economics.
Ans. Micro-economics deals with economic issues related to small economic units like an individual industry, an individual firm, and an individual market.
Q. 3. Define macro-economics.
Ans. Macro means large which means the economy as a whole. It deals with economics issues related to the economy as a whole like national income, employment, total investment, total consumption etc.
Q. 4. What do you understand positive economics?
Ans. Positive economics deals with the problems ‘as they are’, whose facts and figures are verifiable for truth.
Q. 5. What do you understand by normative economics?
Ans. A normative science studies the things “as they should be” and they are not verifiable at all. It deals with opinions of the economists related to economic issues or economic problems.
Q. 6. Who is father of macro-economics?
Ans. J. M. Keynes is the father of macro-economics.
Q. 7. What is alternate name of micro-economics.
Ans. Price theory.
Q. 8. Is Economics a science or an art?
Ans. Economics is both science and art. It is not only science but also social science as it studies the activites of human beings.
Q. 9. Which economist classified the economics as micro and macro?
Ans. Prof. Ragner Frisch.
Q. 10. Give an example of Normative economics.
Ans. A worker should always paid appropriate wage for their daily needs.
1. Define Micro-economics ?
Answer:Micro-economics is the branch of economics that studies the economic activities of individual people, families, firms, and markets. It explains how prices are decided and how consumers and producers make decisions.
2. Define Macro-economics ?
Answer:
Macro-economics is the branch of economics that studies the whole economy. It deals with topics like national income, unemployment, inflation, and economic growth.
3. What is Positive Economics?
Answer:
Positive economics studies facts and real situations. It explains what is happening in the economy without giving opinions or suggestions.
Example: "The price of petrol has increased."
4. What is Normative Economics ?
Answer:
Normative economics is based on opinions and suggestions. It tells what should be done to improve the economy.
Example: "The government should reduce petrol prices."
5. Write Two Characteristics of Micro-economics.
- It studies individual consumers and firms.
- It helps in deciding the price of goods and services.
- It studies the economy as a whole.
- It deals with national income, inflation, and unemployment.
| Micro-economics | Macro-economics |
|---|---|
| Studies individual consumers and firms. | Studies the whole economy. |
| Focuses on one market or one product. | Focuses on all markets together. |
| Studies price determination. | Studies national income and inflation. |
| Deals with small economic units. | Deals with large economic units. |
| Example: Price of milk. | Example: Inflation in India. |
| Positive Economics | Normative Economics |
|---|---|
| Based on facts. | Based on opinions. |
| Explains what is. | Explains what should be. |
| Can be tested with data. | Cannot always be tested. |
| Does not give advice. | Gives suggestions. |
| Example: "Unemployment is 6%." | Example: "The government should create more jobs." |
- Helps consumers make better buying decisions.
- Helps producers decide what and how much to produce.
- Helps in price determination of goods and services.
- It studies only small parts of the economy.
- It ignores national problems like inflation and unemployment.
- It does not show the overall economic condition of the country.
Answer:
Micro-economics is the branch of economics that studies the economic activities of individual people, households, firms, and markets. It explains how consumers spend their income, how producers produce goods, and how prices of goods and services are determined.
Characteristics of Micro-economics
1. Studies Individual Units
- Micro-economics studies individual consumers, firms, industries, and markets.
- It focuses on small economic units.
2. Price Determination
- It explains how the prices of goods and services are decided.
- Prices depend on demand and supply.
3. Efficient Use of Resources
- It helps people and firms use limited resources in the best possible way.
4. Consumer and Producer Behaviour
- It studies how consumers make buying decisions and how producers make production decisions.
5. Limited Scope
- It studies only a small part of the economy and not the whole economy.
Answer:
Macro-economics is the branch of economics that studies the economy as a whole. It deals with national income, inflation, unemployment, economic growth, and government policies.
Characteristics of Macro-economics
1. Studies the Whole Economy
- It studies the overall performance of the country's economy.
2. National Income
- It explains how national income is measured and increased.
3. Economic Growth
- It studies ways to increase production and improve the country's economy.
4. Government Policies
- It helps the government make economic policies for development.
5. Large Economic Units
- It studies the economy at the national and international levels.
Answer:
Micro-economics is very important because it helps consumers, producers, and the government make better economic decisions.
Importance
1. Helps Consumers
- It helps consumers choose goods according to their needs and budget.
2. Helps Producers
- Producers decide what to produce, how much to produce, and at what price to sell.
3. Price Determination
- It explains how the prices of goods and services are decided by demand and supply.
4. Efficient Use of Resources
- It helps in using limited resources wisely without wasting them.
5. Business Decision Making
- Business firms use micro-economics to increase profit and reduce costs.
6. Government Planning
- The government uses micro-economic information to make policies related to markets and industries.
| Micro Economics | Macro Economics |
|---|---|
| Studies individual consumers and firms. | Studies the whole economy. |
| Focuses on small economic units. | Focuses on large economic units. |
| Deals with one product or one market. | Deals with all markets together. |
| Studies price determination. | Studies national income and inflation. |
| Helps individual decision-making. | Helps government policy-making. |
| Example: Price of rice. | Example: National unemployment rate. |
| Positive Economics | Normative Economics |
|---|---|
| Based on facts and reality. | Based on opinions and values. |
| Explains what is happening. | Explains what should happen. |
| Can be tested using data. | Cannot always be tested. |
| Does not give suggestions. | Gives suggestions and advice. |
| Objective in nature. | Subjective in nature. |
| Example: Inflation is 5%. | Example: Inflation should be reduced. |
Answer:
The statement "Macro economics is the study of economic development" is true because macro-economics studies the overall growth and progress of a country's economy.
It focuses on national income, employment, inflation, production, and government policies. These factors help improve the standard of living of people and increase the country's development.
Macro-economics also helps the government prepare plans for economic growth, control inflation, reduce unemployment, and encourage investment. It studies the performance of the entire economy instead of only one person or one business.
Importance of Macro Economics in Economic Development
- It helps increase national income.
- It helps reduce unemployment.
- It controls inflation.
- It supports economic growth.
- It helps the government make development policies.
- It improves the standard of living of people.
Answer:
Micro-economics and macro-economics are different branches of economics, but they are closely connected. They do not compete with each other. Instead, they support each other in understanding the economy.
Micro-economics studies individual consumers, firms, and markets, while macro-economics studies the economy as a whole. The overall economy depends on the activities of individuals, and the decisions of individuals are influenced by the overall economic condition.
How They are Interdependent
1. Individual Decisions Affect the Economy
- The buying and selling decisions of people and firms influence national income and economic growth.
2. Government Policies Affect Individuals
- Government policies made under macro-economics affect consumers, producers, and businesses studied in micro-economics.
3. Price and Inflation are Connected
- Prices of individual goods affect the overall inflation rate in the economy.
4. Employment is Related
- Employment decisions made by firms affect the country's total employment level.
5. Better Economic Planning
- Both branches together help the government and businesses make better decisions.