Page 13 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes Limitations of microeconomics: Inspite of its importance, there are some limitations of Economics,
which are discussed below:
1. It depends on the unreal esteem of true employment in economical situation. According to Kenz,
to adopt true employment is like adopting the situation that there is no problem at all. In this real
world, true employment is not a rule but exceptional. Thus, Microeconomics is not a good method
for economical analysis.
2. Microeconomics is based on Laissez Faire conditions. But nowadays this theory is not used at all.
It is ruled out with the big crises of 1930. So the study of microeconomics seems unreal.
3. Microeconomics deals with fraction and ignores the radical. As Bolding states, “It is impossible
to define a huge and vast system like economical system as a personal unit.” So microeconomics
produces a faded and unreal picture of economical system.
4. Various economical problems are not defined by Microeconomics even not identified too. It is not
necessary that a rule which applies to a firm, a family or a company is also applicable to a huge
economical system too.

Self Assessment

Fill in the blanks:
1. Microeconomics is an important mean in ..................... analysis.
2. Microeconomics helps to understand the problems of ..................... .
3. The word ‘micro’ is taken from Greek word .................... .

1.2 Macroeconomics

Its meaning

Macroeconomics is the study of aggregate or things related to the entire economy like total employment,
unemployment, national income, national production, total investment, total consumption, total
saving, total supply, total demand and general pricing, interest rates and cost structure. In other words,
macroeconomics scans each other relation, their bonding and their ups and downs. Thus as per Ecle,
“Macroeconomics deals with major incidents. This deals with the economical experience as an elephant’s
structure and inspite of checking the bones and hips, it checks the whole size, shapes and structures. It
studies the nature of forest and not the nature of trees which make them forest.”
Macroeconomics is also known as “theory of income and employment” or “income analysation”.
Unemployment, economical ups and downs, inflation, instability, motionless, international trade and
economical development are studied under macroeconomics. It deals with the reason of unemployment
and the various factors of employment. It connects with the business total production, total income
and total employment. In pricing factor, it studies the general pricing and its effect. Debit balance in
international trade and the problems in foreign help come under macroeconomics. Above all the theory
of macroeconomics deals in the study of a nation’s total income and its difficulties as well as its ups and
downs. At last, it studies the reason, which affects on the growth of an economical structure of a nation.

Microeconomics is not able to define many economical conditions.

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