Author: Mahabub 1

Micro Economics
১. অর্থনীতির সংজ্ঞা দাও। অর্থনীতির পরিধি বা বিষয়বস্তু আলোকনা আলোচনা করো।
২. অর্থনীতির স্বল্পতা বা দুষ্প্রাপ্যতা, দক্ষতার ধারণা ব্যাখ্যা করো।
৩. অর্থনীতি বা মানুষের মূল সমস্যা গুলো আলোচনা করো।
৪. সম্পদের দুষ্প্রাপ্যতা নয় বরং অদক্ষ ব্যবহারই অর্থনৈতিক সমস্যা সৃষ্টি করে।
৫. আলোচনা করো।
৬. সুযোগ ব্যয় সম্পর্কে আলোচনা করো।
৭. ব্যষ্টিক ও সামষ্টিক অর্থনীতি এর মধ্যে পার্থক্য।
৮. ব্যষ্টিক অর্থনীতি এর গুরুত্ব, বৈশিষ্ট,ও সীমাবদ্ধতা আলোচনা করো।

Translation
1. Define economics. Discuss the scope or subject matters of economics.
2. Explain the concept of scarcity and efficiency in economics.
3. Discuss the main problems faced by humans in economics.
4. It is not scarcity of resources, but rather their inefficient use that creates economic
problems.
5. Discuss PPC (Production Possibility Curve).
6. Explain the concept of opportunity cost.
7. Differentiate between microeconomics and macroeconomics.
8. Discuss the importance, characteristics, and limitations of microeconomics.

1. Define economics. Discuss the scope or subject matters of economics.

Ans. Economics is a social science that studies individuals and organizations engaged in the
production, distribution, and consumption of goods and services. The goal is to predict
economic occurrences and to develop policies that might prevent or correct such problems as
unemployment, inflation, or waste in the economy. The key focus of economics is
understanding how resources, such as labor, capital, and land, are managed and how
decisions are made to maximize efficiency, welfare, and growth in the face of scarcity.
A famous definition by of the founder of modern economics “Adam Smith” in his book “An
Inquiry into the nature and Causes of Wealth of Nations” in 1776.
“Economics is a subject which studies the nature of wealth and laws which governs its
production, consumption, distribution and exchange.”
The scope of economics is vast and encompasses several areas. If we categorize these
concepts then three of them – Classical/ Wealth concept, Welfare concept and Scarcity related
concept, are mainly dominating.
1. Wealth oriented concept – Adam Smith was the chief economist of classical economics
concept and his followers considered Economics as ‘Science of Wealth’. They imagined
an Economic man and the activities of this Economic man were made the topic for
study. In other words, they studied, what is wealth in Economics? How wealth is
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earned? How it is distributed and used. In this manner wealth became main subject
matters.
2. Welfare oriented concept – Prof. Marshall was the concept Marshal and Pigou gave
main plan to human welfare over wealth and made this thing very clear that wealth is
for man and that man is not for wealth. In this way according to welfare oriented vie, in
the subject matters of Economics ordinary business related economic actions of social
men must be studied, which are related with th4 material welfare. Later the word
mental welfare of welfare oriented view was bitterly criticized, and scarcity related
views brought significant change into the subject matters of Economics
3. Scarcity oriented concept – Scarcity related views are gift of Prof. Robbins. According to
him, in Economics, those persons are studied who are surrounded with the problem of
selection. According to Prof. Robbins, ‘economic problem meaning ‘human nature
aspects of selection’ and ‘description of limited resourced’ etc. problems should be
studied under the subject matters of Economics.

Modern economists do not completely agree with Robbins, as far as the subject mater of
Economics is concerned, because at a given time, economic problem cannot only be the
distribution of the given resource but also the development and growth of resources. Hence,
modern economists are stressing upon the micro and macro economics and theory of cost as
well as on the problems of income and employment. In this manner, at present, subject
matters of Economics can be newly divided into two parts, as (1) Micro Economics and (2)
Micro Economics.

2. Explain the concept of scarcity and efficiency in economics.

Ans. Scarcity refers to the idea that resources are limited. It applies to physical resources like
land, water, and oil, as well as intangible resources like time, skills, and attention. We have to
make choices about how to allocate those resources. People’s material wants, for the most
part, are unlimited. Output, on the other hand, is limited by the state of technology and the
quantity and quality of the economy’s resources.
There are two main types of scarcity: absolute and relative. Absolute scarcity refers to the
physical limitations of resources, while relative scarcity refers to the value we place on
resources.
Scarcity is the foundation of microeconomics. It helps us understand how people make
decisions in the face of limited resources. When resources are scarce, we need to weigh the
pros and cons of different options and choose the one that makes the most sense for us.
In economics, efficiency means it is impossible to improve the situation of one party without
imposing a cost on another. Conversely, if a situation is inefficient, it becomes possible tou
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benefit at least one party without imposing costs on others. In the demand and supply model,
efficiency means that the economy is getting as much benefit as possible from its scarce
resources and all possible gains from trade have been achieved. In other words, the optimal
amount of each good and service is being produced and consumed.

3. Discuss the main problems faced by humans in economics.

Ans. The main problems faced by humans in economics revolve around the fundamental
challenges of scarcity, resource allocation, and inequality. These issues manifest in various
ways, influencing both individual choices and broader societal structures.
Scarcity and Resource Allocation
Scarcity is the core economic problem that arises from the imbalance between unlimited
human wants and limited resources. This necessitates choices about how to allocate
resources effectively. Economists identify three central questions that every economy must
address:
1. What to produce?
Societies must decide which goods and services to produce given their finite resources.
For example, a farmer with limited land must choose between growing rice or wheat.
2. How to produce?
This involves selecting the production techniques, whether labor-intensive (which
creates more jobs) or capital-intensive (which may enhance efficiency). The choice affects
employment levels and economic growth.
3. For whom to produce?
This question addresses the distribution of goods and services among people.
Decisions about production impact who benefits from economic output, often reflecting
disparities in purchasing power and access to resources.
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Inequality and Economic Disparities

Economic inequality is another significant challenge, where wealth is concentrated among a
small segment of the population while many remain impoverished. This disparity can lead to
social unrest and hinder overall economic growth. High rates of unemployment, particularly
among less-educated workers, exacerbate this issue, as many are excluded from participating
in economic advancements.
Additionally, the current economic model often fails to account for environmental costs,
leading to unsustainable practices that disproportionately affect marginalized communities.
The "tragedy of the commons" illustrates how shared resources are overexploited due to
individual self-interest, resulting in long-term detrimental effects on society and the
environment[3].
Environmental Challenges
The failure to integrate environmental considerations into economic planning poses a critical
threat to humanity. Economic activities often disregard ecological limits, leading to climate
change and biodiversity loss. The inability to value natural capital effectively means that long-
term risks associated with environmental degradation are frequently overlooked[3][5].
This situation calls for a transition from linear economic models focused on growth at all costs
to circular models that emphasize sustainability and resilience.
Conclusion
In summary, the main problems in economics stem from the interplay of scarcity, resource
allocation, inequality, and environmental sustainability. Addressing these challenges requires
innovative thinking and policies that prioritize equitable growth and sustainable practices for
future generations.
4. It is not scarcity of resources, but rather their inefficient use that creates economic
problems.
Ans. Scarcity refers to the idea that resources are limited. It applies to physical resources like
land, water, and oil, as well as intangible resources like time, skills, and attention. While
efficiency is using the available resource at best possible way.
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5. Discuss PPC (Production Possibility Curve).
Ans. A production-possibility curve shows the maximum number of alternative combinations
of goods and services that a society can produce at a given time when there is full utilization of
economic resources and technology.

Presents alternative combinations of guns and butter output for a hypothetical economy
(guns represent the output of military goods, while butter represents nonmilitary goods and
services). In choosing what to produce, decision makers have a choice of producing, for
example, alternative D—5,000 guns and 14 million units of butter—or any other alternative
presented.
The production-possibility frontier depicts not only limited productive capability and therefore
the problem of scarcity, but also the concept of opportunity cost. When an economy is
situated on the production possibility curve, such as at point D, gun production can be
increased only by decreasing butter output. Thus, to move from alternative D (5,000 guns and
14 million units of butter) to alternative E (9,000 guns and 6 million units of butter), the
opportunity cost of the additional 4,000 units of gun production is the 8 million less units of
butter that are produced.
The production-possibility frontier shifts outward over time as
more resources become available and/or technology is improved.
When the production-possibility frontier shifts outward,
additional guns can be produced without sacrificing any butter
Quantity of Guns Produced

production. Points on a production-possibility frontier are

considered to be efficient. Points within the frontier are inefficient,
and points outside the frontier are unattainable
Quantity of Butter Produced
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6. Explain the concept of opportunity cost.
Ans. Opportunity cost is what you give up when you choose one option over another. In other
words when decrease or stop production of one product to produce another product is called
opportunity cost. Opportunity cost is a direct implication of scarcity. People have to choose
between different alternatives when deciding how to spend their money and their time.

To produce maximum OA amount of Y product it needs to give up OB amount of X product.

OB amount of X product is the opportunity cost.
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7. Differentiate between microeconomics and macroeconomics.
Ans.
Microeconomics is the branch of economics that concentrates on the behaviour and
performance of the individual economic agents within the economy such as consumers,
family, industry, firms, etc. It ascertains how the limited resources are allocated among
various individuals to satisfy their wants? As well as it specifies the conditions for the best
possible utilization of the resources, in order to attain maximum output and social welfare.
Here, the demand plays a key role in determining the quantity and the price of a product along
with the price and quantity of related goods (complementary goods) and substitute products,
so as to make a judicious decision regarding the allocation of scarce resources, concerning
their alternative uses.
On the other hand in macroeconomics, the entire economic phenomena or the overall
economy is talked about. Basically, it focuses on the behaviour and performance of aggregate
variables and those issues which affect the whole economy.
It includes regional, national and international economies and covers the major areas of the
economy like unemployment, poverty, general price level, total consumption, total savings,
GDP (Gross Domestic Product), imports and exports, economic growth, globalisation,
monetary/ fiscal policy, etc.

Basis for Microeconomics Macroeconomics

Comparison
The branch of economics that The branch of economics that studies
Meaning studies the behavior of an the behavior of the whole economy,
individual consumer, firm, family (both national and international) is
is known as Microeconomics. known as Macroeconomics.
Deals with Individual economic variables Aggregate economic variables
Business Applied to operational or internal Environment and external issues
Application issues
Tools Demand and Supply Aggregate Demand and Aggregate
Supply
Assumption It assumes that all macro- It assumes that all micro-economic
economic variables are constant. variables are constant.
Concerned Theory of Product Pricing, Theory Theory of National Income, Aggregate
with of Factor Pricing, Theory of Consumption, Theory of General Price
Economic Welfare. Level, Economic Growth.
Scope Covers various issues like Covers various issues like, national
demand, supply, product pricing, income, general price level,
factor pricing, production, distribution, employment, money etc.
consumption, economic welfare,
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Basis for Microeconomics Macroeconomics
Comparison
etc.
Importance Helpful in determining the prices Maintains stability in the general price
of a product along with the prices level and resolves the major problems
of factors of production (land, of the economy like inflation,
labor, capital, entrepreneur etc.) deflation, reflation, unemployment
within the economy. and poverty as a whole.
It is based on unrealistic It has been analyzed that 'Fallacy of
assumptions, i.e. In Composition' involves, which
Limitations microeconomics it is assumed sometimes doesn't proves true
that there is a full employment in because it is possible that what is true
the society which is not at all for aggregate may not be true for
possible. individuals too.
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8. Discuss the importance, characteristics, and limitations of microeconomics.
Ans. Microeconomics is the social science that studies the implications of incentives and
decisions and how they affect the utilization and distribution of resources on an individual
level. Microeconomics shows how and why different goods have different values. It addresses
how individuals and businesses conduct and benefit from efficient production and exchange
and how individuals can best coordinate and cooperate with each other.
Apparently there are two main types of economics. Microeconomics and macroeconomics.
Microeconomics studies the economic actions and behaviour of individual units and small
groups of individual units. It is the study of small components of the economy. On the other
hand macroeconomics discuss whole economics situation of any country.

Disadvantages / Limitations of Microeconomics:

Following are the demerits of micro economic analysis and policies related to it.
1. Free Market Economy:
Microeconomics is based on the idea of free market economy. In fact, there Is no free market
economy after great depression of 1930.
2. Study of Parts:
Microeconomics is concerned with study of parts but not the whole. In terms of individual
terms, it is impossible to describe large and complex universe of facts like economic system.
3. Misleading for Analysis:
Microeconomics is inadequate and misleading for analysis of economic problems. The
principles relating to an individual household cannot be applied to the whole. economic
system.
4. Full Employment:
Microeconomics assumes that there is full employment. There is no full employment at all
times in this world. Full employment is an exception in practical life.
5. Economic Instability:
When every single firm it allowed to operate freely in an open economy, it would naturally go
for self-interest; even at the cost of national interest. Thus, it would disrupt the cohesion
between different productive units which will ultimately force the economy to move into
depression. A free enterprise economy is therefore an unstable economy i.e. the economy
which keep: on fluctuating with boom: and depressions.
6. Exploitation of Consumers:
Inspite of proper guidance for the consumers the real-life situation reveals that they are
exploited. This happens with the rising rate of inflation iii an economy. With the pace of
inflation, on one hand, wealth keeps on concentrating in a few hands while, on the other hand,
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consumers are deprived of their purchasing power. The natural inequality of income
distribution in a free enterprise economy leads to exploitation of consumers.
7. Exploitation of Labourers:
Entrepreneurs exploit their labourers by keeping their wage rate low or even lower than their
marginal productivity. This happens in three ways:
(i) By forcing labourers to work for more hours than required under labour laws.
(ii) By installing automatic and computerized plants to increase the marginal productivity of
labour which is not followed by increase in their wage rate.
(iii) By setting up production units in remote areas to employ labour at notoriously low wage
rate.
8. Absence of Large-Scale Production:
Micro economic analysis encourages setting up of small units for growth of economy. This
could possibly be achieved more efficiently by initiating and encouraging large scale
production.
9. Unrealistic Assumptions:
Micro economics is based on unrealistic assumptions, especially in case of full employment
assumption which does not exist practically. Even behaviour of one individual cannot be
generalised as the behaviour of all.
10. Inadequate Data:
Micro economics is based on the information dealing with individual behaviour, individual
customers. Hence, it is difficult to get correct information. So, because of incorrect data Micro
Economics may provide inaccurate results.