Class 11 Economics - Microeconomics Study Notes

Scarcity: Limited resources vs. unlimited wants.
Opportunity Cost: The value of the next best alternative foregone when making a choice.
Utility: Satisfaction derived from consuming goods and services.
- Total Utility: Aggregate satisfaction from all units consumed.
- Marginal Utility: Additional satisfaction from consuming one more unit.

Law of Demand: Inverse relationship between price and quantity demanded.
Demand Curve: Downward sloping graph showing demand at various prices.
Factors Affecting Demand:
- Price of the good.
- Income of consumers.
- Prices of related goods (substitutes and complements).
- Consumer preferences.

Law of Supply: Direct relationship between price and quantity supplied.
Supply Curve: Upward sloping graph showing supply at various prices.
Factors Affecting Supply:
- Production costs.
- Technology.
- Number of sellers.
- Expectations of future prices.

Equilibrium Price: Price at which quantity demanded equals quantity supplied.
Shifts in Equilibrium: Changes in demand or supply can cause shifts, leading to a new equilibrium.

Price Elasticity of Demand: Measure of responsiveness of quantity demanded to a price change.
- Elastic (>1): Demand changes significantly with price change.
- Inelastic (<1): Demand changes little with price change.
Factors Influencing Elasticity:
- Availability of substitutes.
- Necessity vs. luxury.
- Time period for adjustment.

Factors of Production: Land, labor, capital, and entrepreneurship.
Short Run vs. Long Run:
- Short Run: At least one fixed factor of production.
- Long Run: All factors of production are variable.
Cost Concepts:
- Fixed Costs: Costs that remain constant regardless of output.
- Variable Costs: Costs that change with the level of output.
- Total Cost: Sum of fixed and variable costs.

Perfect Competition: Many buyers and sellers; identical products; no barriers to entry.
Monopoly: Single seller; unique product; high barriers to entry.
Monopolistic Competition: Many sellers; differentiated products; some barriers to entry.
Oligopoly: Few sellers; interdependent pricing; barriers to entry.

Indifference Curves: Graphical representation of consumer preferences.
Budget Line: Represents all possible combinations of two goods a consumer can purchase with a given income.

Price Controls: Government-imposed limits on prices (price ceilings and floors).
Subsidies: Financial support to increase production or consumption of goods.
Taxes: Levies on goods to generate revenue or discourage consumption.

Microeconomics provides insights into the functioning of individual markets and the behavior of consumers and firms, forming the foundation for understanding broader economic concepts.

Focuses on individual economic units such as consumers and firms.
Analyzes how decisions are made and how resources are allocated in these entities.

Scarcity: Refers to the limited availability of resources compared to unlimited human desires.
Opportunity Cost: Represents the value of the next best alternative that is forgone when a choice is made.
Utility: Measures the satisfaction or pleasure gained from consuming goods and services.
Total Utility: The cumulative satisfaction obtained from all units of a good consumed.
Marginal Utility: The additional satisfaction gained from consuming one more unit of a good.

Law of Demand: Highlights an inverse relationship between the price of a good and the quantity demanded by consumers.
Demand Curve: A graphical representation showing a downward slope that indicates the quantity demanded at various price levels.
Factors Affecting Demand:
- The price of the good itself.
- Changes in consumer income.
- Prices of related goods, including substitutes and complements.
- Shifts in consumer preferences and tastes.

Law of Supply: Indicates a direct relationship between the price of a good and the quantity supplied by producers.
Supply Curve: An upward sloping graph that illustrates the quantity supplied at different price points.
Factors Affecting Supply:
- Costs associated with production.
- Advancements in technology that may influence production efficiency.
- The number of sellers in the market.
- Producers' expectations regarding future prices.

Equilibrium Price: The price at which the quantity demanded by consumers equals the quantity supplied by producers.
Shifts in Equilibrium: Changes in either demand or supply can result in shifts, resulting in a new market equilibrium.

Price Elasticity of Demand: Assesses how responsive the quantity demanded is to changes in price.
Elastic Demand: When the elasticity is greater than 1, indicating significant changes in demand with price fluctuations.
Inelastic Demand: When elasticity is less than 1, showing that demand changes little in response to price changes.