Maharashtra State Board Class 12 Economics Solutions Chapter 1 Introduction to Micro and Macro Economics
1. Choose the correct option:
2. Complete the correlation:
1) Micro economics : Slicing method : : Macro economics: ……………. 1
2) Micro economics: Tree : : Macro economics: …………….. 2
3) Macro economic theory : Income and employment:: Micro economics : ……………. 4
4) Makros : Macro economics:: Mikros : ……………… 3
5) General equilibrium : Macro economics :: …………….. : Micro economics 5
Answers:
3. Identify and explain the concepts from the given illustrations:
Eg. What to produce? How much to produce? How to produce? etc. decisions are taken by producers.
With the help of free market economy Ramesh has taken decision related to production such as What to produce? and How to produce?
Shabana is an entrepreneur who has paid wages to its worker in a factory for production of goods and also paid interest on her bank loan in form of rewards to the factors of production.
4. Answer the following:
2. Theory of General Price Level and Inflation: Macro economics analyses shows how the general price level is determined and the causes for fluctuations in it. This study is important for understanding the problems created by inflation and deflation.
3. Theory of Economic Growth and Development : Macro economics studies the causes of under development and poverty in poor countries and suggests strategies for accelerating growth and development in the country.
4. Macro theory of Distribution : Macro theory of distribution deals with the relative share of rent, wages, interest and profit in j the total national income of various classes.
5. State with reasons whether you agree or disagree with the following statements:
6. Answer in detail :
(2) Meaning:
Micro economics deals with small individual economics units such as an individual ( consumer, individual producer, the price of a particular commodity or factor etc.
(3) Importance :
(a) Price Determination : Micro economics j explains how the prices of different products < and various factprs of production are determined.
(b) Free Market Economy : A free market economy is that economy where the economic decisions are taken at individual levels without intervention by the government. Decisions are regarding production of goods such as What to produce? How much to produce? How to produce? etc.
(c) Foreign Trade : Micro economics also explains gains from foreign trade, effects of tarrifs, factors affecting exchange rate, etc.
(d) Economic Model Building : Micro
economics helps in understanding various complex economic situations with the help of economic models.
(e) Business Decision : Micro economics theories are helpful to businessman for taking important business decision related to determination of cost of production and prices of goods, maximization of output & profit, etc.
(f) Useful to Government : It is useful in formulating and evaluating economic policies including pricing and distribution policies that promote economic welfare. It is useful in determining tax policy, public, expenditure policy, etc.
(g) Basis of Welfare Economics : It explains how optimum use of resources can be made to increase the welfare of the society. It also studies how taxes affect social welfare.
(1) Definition:
(a) J. L. Hansen : “Macro economics is that branch of economics which considers the relationship between large aggregates such as the volume of employment, total amount of savings, investment, national income, etc”.
(b) Prof. Carl Shapiro : “Macro economics deals with the functioning of the economy as a whole. ”
(2) Meaning:
Macro economics is the study of aggregates national income, total employment, total consumption, inflation, total saving, etc.
(3) Features:
(a) Study of Aggregate : Macro economics deals with the study of entire economy. It studies the overall condition in the economy, such as National Income, National Output, Total Employment, General Price levels, etc.
(b) General Price Level : Macro economic studies the determination and changes in general price level which is the average of all prices of goods and services currently being produced in the economy.
(c) policy Oriented : Macro economics is a policy oriented science which is useful in formulating economic policies to promote economic growth, to control inflation and depression, to generate employment, etc.
(d) Lumping Method : Lumping method is the study of the whole economy rather than in part. It considers aggregates like National Income, Total consumption, etc. instead of personal income, PCC, etc.
(e) General Equilibrium Analysis : Macro Economics analysis is based on general equilibrium which deals with the economic system as a whole and studies the inter relationships between the various macro variables in an economy. General equilibrium deals with the behaviour of demand, supply and prices in the whole economy.
(f) Income Theory : Macro economics studies the concept of National Income and its causes of fluctuations that lead to business cycles i.e. inflation and deflation.
(g) Growth Models : Macro economics studies various factors that contribute to economic growth and development. These growth models are used for studying economic development.
(h) Interdependence : There is an element of interdependence among the macro economic variables such as income, output, employment, investment, price level, etc.
Intext Questions
Try this (Textbook Page 6)
Visit the vegetable market in the nearest area and try to get information about income and expenditure items of a particular seller.
Answer:
[Note : Students should do this activity by themselves.]