Page 16 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Unit-1: Introduction to Microeconomics

11. Microeconomics is the study of pricing law. Notes
12. The consumption and productivity is based on social welfare and perfect efficiency of individual welfare.
Non-interdependencies between the two — Apart from this relationship, there are various economical
problems, which are not related to an individual, and many problems do not relate to whole economical
structure. For example, there is the difference between a person’s income and his expenditure, but
for a whole economical state, the income and expenditure are always equal. An individual can invest
without savings but savings and investment should always be equal to an economy. When there is full
employment in an economy then a firm can increase its production attracting the of other firms. But
the whole industry could not increase resources of that type. The export of a country can be more than
import or vice versa but for the whole world the export import should be equal.
Proper integration of the two approaches — Actually, there is not a true line between micro and
macroeconomics. Both should come under a simple law of economics. There is a simple theory, that both
should come under a general theory of the economy. This principle should be the prices, production,
income, individuals, individual firms and industries to explain the behaviour of groups and individual
variables. In macroeconomics and microeconomics really no line can be drawn correctly. A general
theory of the economy clearly will embrace both; personal behaviour, personal income, and prices will
interpret and create groups with individual results add or averages macroeconomics is concerned.
There is a general principle, but the scope has left fewer things from it. Thus, the main thing is to mix the
both economics. Prof. Ackley has given suggestion that the microeconomics should give the building
blocks for macroeconomics. But to understand the macroeconomics, microeconomics is also helpful.
For example, if we search some economical theories for stable microeconomics which should not match
with macroeconomical theory or not related to any behaviour which is avoided by macroeconomics
then microeconomics should allow to update our knowledge and behaviour but to ride on this way, we
do not need to know the technical difficulties which states that “the macroeconomical theory of pricing
and income depends on microeconomical theories.”

1.5 Summary

· There should be no line in micro and macroeconomics. Both should come under a simple line of
economics. There should be a law which can describe the pricing, production, income, individual,
individual firm and company. In fact, we cannot draw a line between micro and macroeconomics. A
simple theory of economy can relate with both; will describe an individual behaviour, income and
pricing and this average will add or create a group which will create macroeconomics. However,
this type of theory we have but the wholeness affects this to use widely. To reach the true result, we
can find that the problem of micro can be defined by microeconomics and vice versa.

1.6 Keywords

· Microeconomics: The study of smallest part of an economy
· Macroeconomics: The study of a wide range of economy

1.7 Review Questions

1. What do you mean by microeconomics?
2. What do you mean by macroeconomics?
3. Give differences between micro and macroeconomics.
4. Describe the dependencies of micro over macroeconomics.

LOVELY PROFESSIONAL UNIVERSITY 9