Posted by Anjali Kaur on Jul 09, 2020

Introduction To Microeconomics

Economics is one of the social sciences, which has a great influence on every human being. As economic life and the economy go through changes, it is important to understand the functioning of an economy. After going through the Introduction to Economics, now we will understand the microeconomics branch of economics.

Branches of the economy

There are two branches of the economy:

  1. Microeconomics:
    • It is that part of the economic theory that deals with individual units of an economy.
    • Microeconomics variables are demand, supply, the income of a consumer, etc.
    • Microeconomics deals with the central problems of the allocation of resources.
    • For example, a firm, a household, etc.
  2. Macroeconomics
    • It is that part of the economic theory that deals with aggregate unis of an economy.
    • Macroeconomics variables are aggregate supply, aggregate demand, national income, etc.
    • Macroeconomics deals with the central problems determination of the level of income in an economy, or the unemployment level, etc.
    • For example, all firms, all households, etc.

What do we mean by positive economics?

Positive economics studies the facts or reality of life that is, it deals with the things as they are. It deals with, ‘what are the economic problems’ and ‘how are they solved’. For example, India is an overpopulated country, prices are constantly rising.

Remember, Positive economics talks about the present scenario and shows the reality of life or real facts. Its data can be verified.

What do we mean by normative economics?

Normative economics tells us what ought to be or what should be the case. It deals with what should be or how economic problems should be solved. For example, India should not be an overpopulated country, prices should not rise in an economy, etc.

Remember, Normative economics talks about ideal circumstances and not about the existing reality. It is suggestive and cannot be verified.

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