Page 11 - VIRANSH COACHING CLASSES
P. 11
(a) Theory of Product Pricing : The price of
Maynard Keynes published his famous an individual commodity is determined by
book the "General Theory of Employment,
Interest and Money" in 1936. Keynes the market forces of demand and supply.
used macro economic approch to analyse Micro economics is concerned with demand
economic problems. The credit for the analysis i.e. individual consumer behaviour,
development of macro economic approach and supply analysis i.e. individual producer
goes to Lord Keynes. Besides Keynes, behaviour.
Malthus, Wicksell, Walras, Irving Fisher (b) Theory of Factor Pricing : In Micro
are other economists who have contributed economics, land, labour, capital and
to the development of macro economics. entrepreneur are the factors that contribute
to the production process. Micro economics
Meaning of Micro Economics : helps in determining the factor rewards for
Micro means a small part of a thing. Micro land, labour, capital, and entrepreneur in
economics thus deals with a small part of the the form of rent, wages, interest, and profit
national economy. It studies the economic respectively.
actions and behaviour of individual units such
as an individual consumer, individual producer (c) Theory of Economic Welfare : Theory of
or a firm, the price of a particular commodity or Welfare basically deals with efficiency in
a factor etc. the allocation of resources. Efficiency in the
allocation of resources is attained when it
Definitions of Micro Economics :
You have already studied some important results in maximization of satisfaction of
definitions of micro economics, let us review the people. Economic efficiency involves
some more definitions : three efficiencies :
1) Maurice Dobb - “Micro economics is in • Efficiency in production : Efficiency in
fact a microscopic study of the economy.” production means producing maximum
possible amount of goods and services from
2) Prof A. P. Lerner - “Micro economics
consists of looking at the economy through the given amount of resources.
a microscope, as it were, to see how the • Efficiency in consumption : Efficiency
millions of cells in the body of economy – the in consumption means distribution of
individuals or households as consumers and produced goods and services among the
individuals or firms as producers play their people for consumption in such a way as to
part in the working of the whole economic maximize total satisfaction of the society.
organism.” The following chart gives an • Overall economic efficiency : It means the
idea of the scope of micro economics. production of those goods which are most
Scope of Micro Economics desired by the people.
Micro economic theory shows under what
Theory of Theory of Theory of conditions these efficiencies are achieved.
Product Pricing Factor Pricing Economic Thus, the focus of micro economics
Rent Welfare
Demand Supply Wages is mainly confined to price theory and
Analysis Analysis Interest resource allocation. It does not study the
Profit aggregates relating to the whole economy.
Efficiency in Efficiency in Overall Economic This approach does not study national
Production Consumption Efficiency economic problems such as unemployment,
2
