Page 10 - DLIS407_INFORMATION AND LITERATURE SURVEY IN SOCIAL SCIENCES

Unit 1: Introduction to Social Science Disciplines

1.2.1 Microeconomics Notes

Markets

Microeconomics, like macroeconomics, is a fundamental method for analyzing the economy as a
system. It treats households and firms interacting through individual markets as irreducible elements
of the economy, given scarcity and government regulation. A market might be for a product, say
fresh corn, or the services of a factor of production, say bricklaying, The theory considers aggregates
of quantity demanded by buyers and quantity supplied by sellers at each possible price per unit. It
weaves these together to describe how the market may reach equilibrium as to price and quantity or
respond to market changes over time.
Such analysis includes the theory of supply and demand. It also examines market structures, such as
perfect competition and monopoly for implications as to behaviour and economic efficiency. Analysis
of change in a single market often procedes from the simplifying assumption that relations in other
markets remain unchanged, that is, partial-equilibrium analysis. general-equilibrium theory allows
for changes in different markets and aggregates across all markets, including their movements and
interactions toward equilibrium.

Production, Cost, and Efficiency

In microeconomics, production is the conversion of inputs into outputs. It is an economic process that
uses inputs to create a commodity for exchange or direct use. Production is a flow and thus a rate
of output per period of time. Distinctions include such production alternatives as for consumption
(food, haircuts, etc.)
VS. investment goods (new tractors, buildings, roads, etc.), public goods (national defense, small-pox
vaccinations, etc.) or private goods (new computers, bananas, etc.) and "guns" VS. "butter".
Opportunity cost refers to the economic cost of produciton: the value of the next best opportunity
foregone choices must be made between desirable yet mutually exclusive actions. It has been described
as expressing " the basic relationship between scarcity and choice". The opportunity cost of an activity
is an element in ensuring that scarce resources are used efficiently, such that the cost is weighed
against the value of that activity in deciding on more or less of it. Opportunity costs are not restricted
to monetary or financial costs but could be measured by the real cost of output forgone, leisure, or
anything else that provides the alternative (utility). Inputs used in the production process include such
primary factors of production as labour services, capital (durable produced goods used in production,
such as an existing) factory and land.

1.2.2 Macroeconomics

Macroeconomics examines the economy as a whole to explain broad aggregates and their interactions
"top down," that is, using a simplified form of general-equilibrium theory. such aggregates include
national income and output, the unemployment rate, and price inflation and sub aggregates like total
consumption and investment spending and their components. It also studies effects of monetary
policy and fiscal policy. In order to procede with this examination it is necessary to envisage the
macroeconomics system or (social organization of the greater community or nation) in a form that
can be easily understood and appreciated. This is done by means of a macroeconomics model, which
is a general experssion of the system that is useful for purposes of discussion. The model can take
a number of different forms including block diagrams, algebraic equations, mechanical analogy,
electronic analogy, leontief Matrix, etc. A suitable model for use in representing the macroeconomic
system is shown in the illustration for a closed macroeconomics system without including "The Rest

LOVELY PROFESSIONAL UNIVERSITY 5