Individual Entities Eg:1.Demand for bread 2.Production decision

Individual Entities
Eg:1.Demand for bread
2.Production decision for a
firm
3.Consumer behavior

Basic Economic Problems
• What to produce? In what quantities?
• How to produce?
• To whom to produce?
Economic Systems
• Market/Liberal System.
• Mixed System.
• Command/Planned System.

• Unlimited Limited
Needs and wants Resources
Scarcity
Opportunity Cost

Production Possibility Curve Analysis
Assumptions
1. Only two goods can be produced
E.g: food and clothing
2.Resource base in the economy is fixed during
the period under consideration
3.Resource can be combined in any way to
produce the given two goods.
4.Technology is fixed

The PPC

Increasing Opportunity Cost

Shift of the PPF: Economic Growth
Economic growth results in an
outward shiftof the PPF because
production possibilities are
expanded.

Positive and Normative Economic Analysis
• Positive- Based on Past Empehrical evidence
“If then….”
“If the price of fuel goes up, then the cost of living
invariably goes up”
• Normative-Value judgments
The government should spend more on education and
health
E.g.: A family of four with a monthly income of Rs
40,000/= should be exempted from taxes.