Presented To:Presented To:

Mr. RasheedMr. Rasheed Presented By:Presented By:

Muhammad HaroonMuhammad Haroon

Farman Ali Farman Ali

Muhammad HaroonMuhammad Haroon

M B A M B A 2nd2nd

Roll No:10607Roll No:10607

Definition of EconomicsDefinition of Economics::

Economics is a science which studiesEconomics is a science which studies

human behaviour as a relation betweenhuman behaviour as a relation between

unlimited desires and limited meansunlimited desires and limited means

(resources) which have alternative uses.(resources) which have alternative uses.

Classification of EconomicsClassification of Economics Micro EconomicsMicro Economics Macro EconomicsMacro Economics

Economics

Micro Macro

Micro EconomicsMicro Economics

Definition:Definition: Microeconomics is a branch of economics that Microeconomics is a branch of economics that

studies how individuals, households and firms and studies how individuals, households and firms and some states make decisions to allocate limited some states make decisions to allocate limited resources, typically in markets where goods or resources, typically in markets where goods or services are being ...services are being ...

Micro economics has been divided into four partsMicro economics has been divided into four parts

1 production:1 production:Meaning of production of wealth.Meaning of production of wealth.Cost of production & how it is minimize.Cost of production & how it is minimize.Analysis of supply.Analysis of supply.

2 Exchange:2 Exchange:This part covers the market mechanism or exchange of This part covers the market mechanism or exchange of wealth through the forces of wealth through the forces of demand & supply.demand & supply.Perfect and imperfect competitionPerfect and imperfect competitionBehaviour of competitors.Behaviour of competitors.

3 Distribution:3 Distribution:

This part starts with the theory This part starts with the theory of distribution of rewards to four factors of of distribution of rewards to four factors of production.production.

WagesWages RentRent InterestInterest Profit.Profit.

4 Consumption4 Consumption

This part focus on the behaviour This part focus on the behaviour of a consumerof a consumer

Maximize the total utilityMaximize the total utility Minimize the expenditureMinimize the expenditure

ImportanceImportance

To make economic policies for efficient To make economic policies for efficient production.production.

To understand the working of private To understand the working of private enterprise economy. enterprise economy.

To study the welfare of the economy. To study the welfare of the economy.

Limitations Limitations

It studies a part of economy not as a whole.It studies a part of economy not as a whole. Similarly a single firm or an industry is in Similarly a single firm or an industry is in

progress but the whole economy may be in progress but the whole economy may be in depression. depression.

Farman AliFarman Ali

M B A M B A 2nd2nd

Roll No:10609Roll No:10609

Macro EconomicsMacro Economics

Definition:Definition:

A study of the economy as a whole, particularly the A study of the economy as a whole, particularly the interaction of its various components.interaction of its various components.

The study of the entire economy in terms of the total The study of the entire economy in terms of the total amount of goods and services produced, total income amount of goods and services produced, total income earned, the level of employment .earned, the level of employment .

Components of Macro EconomicsComponents of Macro Economics

National IncomeNational Income InflationInflation Deflation Deflation Trade CycleTrade Cycle Aggregate Unemployment Aggregate Unemployment

ImportanceImportance It studies overall market structure.It studies overall market structure. Overall production cost is considered.Overall production cost is considered. It is helpful to understand the functioning of It is helpful to understand the functioning of

complete economic system.complete economic system. Economics policies can’t be made just for an Economics policies can’t be made just for an

individual but made for nation as a whole. individual but made for nation as a whole. Overall tax expects of the country is considered. Overall tax expects of the country is considered.

It is helpful to find the solution of current It is helpful to find the solution of current economic problems economic problems e.g. unemployment, inflation and poverty. e.g. unemployment, inflation and poverty.

In real view whole economy is more important In real view whole economy is more important than the individual. than the individual.

Limitations Limitations

Individual is ignored in macro economics but Individual is ignored in macro economics but the individual welfare is main aim of the individual welfare is main aim of economics.economics.

Macro economics don’t show the individual Macro economics don’t show the individual difference. For instance, general price level difference. For instance, general price level may be stable but the prices of food grains are may be stable but the prices of food grains are unbearable for the poor.unbearable for the poor.

Differentiation Differentiation Study of any specific Study of any specific

individual unitindividual unit e.g.e.g.

A Consumer, A Firm, An A Consumer, A Firm, An Industry, Fop'sIndustry, Fop's

Micro approach should be Micro approach should be applied when individual applied when individual cases are to be examined.cases are to be examined.

Economic policies made for Economic policies made for efficient production. efficient production.

Study of economy as a Study of economy as a whole whole

e.g.e.g.National Income, Inflation, National Income, Inflation, Trade Cycle etc.Trade Cycle etc.

Macro approach should be Macro approach should be applied when aggregate applied when aggregate problem are involved. problem are involved.

Economic policies made for Economic policies made for nation as a whole.nation as a whole.

Macro analysis is helpful to Macro analysis is helpful to find the solution. find the solution.

Conclusion Conclusion

The Micro and Macro economics are The Micro and Macro economics are interdependent. Both approaches help to interdependent. Both approaches help to analyze the working of the economy. analyze the working of the economy. Sometimes Micro analysis is need and Sometimes Micro analysis is need and sometimes Macro analysis is need, but both sometimes Macro analysis is need, but both are important and we can’t neglect any one. are important and we can’t neglect any one. Macro approach should be applied when Macro approach should be applied when aggregate problems are involved and Macro aggregate problems are involved and Macro approaches should be applied when individual approaches should be applied when individual cases are to be examined. cases are to be examined.

Questions?Questions???

ThanksThanks