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# CBSE Class 12 Commerce Economics Part A Introductory Microeconomics Complete Details

## CBSE Class 12 Commerce Economics Part A Introductory Microeconomics Complete Details

CBSE Class 12 Commerce Economics Part A Introductory Microeconomics : The CBSE envisions a robust, vibrant and holistic school education that will engender excellence in every sphere of human endeavour. The Board is committed to provide quality education to promote intellectual, social and cultural vivacity among its learners. It works towards evolving a learning process and environment, which empowers the future citizens to become global leaders in the emerging knowledge society. The Board advocates Continuous and Comprehensive Evaluation with an emphasis on holistic development of learners. The Board commits itself to providing a stress-free learning environment that will develop competent, confident and enterprising citizens who will promote harmony and peace.

### CBSE Class 12 Commerce Economics Part A Introductory Microeconomics Complete Details

CBSE Class 12 Commerce Economics Part A Introductory Microeconomics : Here our team members Provides CBSE Class 12 Commerce Economics Part A Introductory Microeconomics Complete Details. CBSE Class 12 Commerce Economics Part A Introductory Microeconomics Complete Details Included 4 units. These CBSE Class 12 Commerce Economics Part A Introductory Microeconomics Complete Details Four  units included some topics those are under given following :

### Part A: Introductory Microeconomics

Unit 1: Introduction

Meaning of microeconomics and macroeconomics
What is an economy? Central problems of an economy : what, how and for whom to produce; concepts of production possibility frontier and opportunity cost.

Unit 2: Consumer Equilibrium and Demand

Consumer’s equilibrium – meaning of utility, marginal utility, law of diminishing marginal utility, conditions of consumer’s equilibrium using marginal utility analysis.
Indifference curve analysis of consumer’s equilibrium-the consumer’s budget (budget set and budget line), preferences of the consumer (indifference curve, indifference map) and conditions of consumer’s equilibrium.
Demand, market demand, determinants of demand, demand schedule, demand curve and its slope, movement along and shifts in the demand curve; price elasticity of demand – factors affecting price elasticity of demand; measurenment of price elasticity of demand – (a) percentage-change method and (b) geometric method (linear demand curve); relationship between price elasticity of demand and total expenditure.

Unit 3: Producer Behaviour and Supply

Production function – Short-Run and Long-Run
Total Product, Average Product and Marginal Product.
Returns to a Factor.
Cost and Revenue: Short run costs – total cost, total fixed cost, total variable cost; Average cost; Average fixed cost, average variable cost and marginal cost-meaning and their relationship.
Revenue – total, average and marginal revenue – meaning and their relationship.
Producer’s equilibrium-meaning and its conditions in terms of marginal revenue-marginal cost.
Supply, market supply, determinants of supply, supply schedule, supply curve and its slope, movements along and shifts in supply curve, price elasticity of supply; measurement of price elasticity of supply – (a) percentagechange method and (b) geometric method.

Unit 4: Forms of Market and Price Determination

Perfect competition – Features; Determination of market equilibrium and effects of shifts in demand and supply.

Other Market Forms – monopoly, monopolistic competition, oligopoly – their meaning and features.
Simple Applications of Demand and Supply: Price ceiling, price floor.

### CBSE Class 12 Commerce Economics Part A Introductory Microeconomics Complete Details

CBSE Class 12 Commerce Economics Part A Introductory Microeconomics :  Economics is a social science concerned with the production, distribution and consumption of goods and services. It studies how individuals, businesses, governments and nations make choices on allocating resources to satisfy their wants and needs, and tries to determine how these groups should organize and coordinate efforts to achieve maximum output. Economic analysis often progresses through deductive processes, much like mathematical logic, where the implications of specific human activities are considered in a “means-ends” framework. Economics can generally be broken down into macroeconomics, which concentrates on the behavior of the aggregate economy, and microeconomics, which focuses on individual consumers.

### CBSE Class 12 Commerce Economics Consumer Equilibrium and Demand

CBSE Class 12 Commerce Economics Part A Introductory Microeconomics :  CBSE Class 12 Commerce Economics Part A Introductory Microeconomics : CBSE Class 12 Commerce Economics Part A Introductory Microeconomics : When consumers make choices about the quantity of goods and services to consume, it is presumed that their objective is to maximize total utility. In maximizing total utility, the consumer faces a number of constraints, the most important of which are the consumer’s income and the prices of the goods and services that the consumer wishes to consume. The consumer’s effort to maximize total utility, subject to these constraints, is referred to as the consumer’s problem. The solution to the consumer’s problem, which entails decisions about how much the consumer will consume of a number of goods and services, is referred to as consumer equilibrium.

### Download Here CBSE Class 12 Commerce Economics Consumer Equilibrium And Demand Complete Notes In PDF Format

Determination of consumer equilibrium. Consider the simple case of a consumer who cares about consuming only two goods: good 1 and good 2. This consumer knows the prices of goods 1 and 2 and has a fixed income or budget that can be used to purchase quantities of goods 1 and 2. The consumer will purchase quantities of goods 1 and 2 so as to completely exhaust the budget for such purchases. The actual quantities purchased of each good are determined by the condition for consumer equilibrium, which is

This condition states that the marginal utility per dollar spent on good 1 must equal the marginal utility per dollar spent on good 2. If, for example, the marginal utility per dollar spent on good 1 were higher than the marginal utility per dollar spent on good 2, then it would make sense for the consumer to purchase more of good 1 rather than purchasing any more of good 2. After purchasing more and more of good 1, the marginal utility of good 1 will eventually fall due to the law of diminishing marginal utility, so that the marginal utility per dollar spent on good 1 will eventually equal that of good 2. Of course, the amount purchased of goods 1 and 2 cannot be limitless and will depend not only on the marginal utilities per dollar spent, but also on the consumer’s budget.

An example. To illustrate how the consumer equilibrium condition determines the quantity of goods 1 and 2 that the consumer demands, suppose that the price of good 1 is $2 per unit and the price of good 2 is$1 per unit. Suppose also that the consumer has a budget of $5. The marginal utility ( MU) that the consumer receives from consuming 1 to 4 units of goods 1 and 2 is reported in Table . Here, marginal utility is measured in fictional units called utils, which serve to quantify the consumer’s additional utility or satisfaction from consuming different quantities of goods 1 and 2. The larger the number of utils, the greater is the consumer’s marginal utility from consuming that unit of the good. Table also reports the ratio of the consumer’s marginal utility to the price of each good. For example, the consumer receives 24 utils from consuming the first unit of good 1, and the price of good 1 is$2. Hence, the ratio of the marginal utility of the first unit of good 1 to the price of good 1 is 12.

The consumer equilibrium is found by comparing the marginal utility per dollar spent (the ratio of the marginal utility to the price of a good) for goods 1 and 2, subject to the constraint that the consumer does not exceed her budget of $5. The marginal utility per dollar spent on the first unit of good 1 is greater than the marginal utility per dollar spent on the first unit of good 2(12 utils > 9 utils). Because the price of good 1 is$2 per unit, the consumer can afford to purchase this first unit of good 1, and so she does. She now has $5 −$2 = $3 remaining in her budget. The consumer’s next step is to compare the marginal utility per dollar spent on the second unit of good 1 with marginal utility per dollar spent on the first unit of good 2. Because these ratios are both equal to 9 utils, the consumer is indifferent between purchasing the second unit of good 1 and first unit of good 2, so she purchases both. She can afford to do so because the second unit of good 1 costs$2 and the first unit of good 2 costs $1, for a total of$3. At this point, the consumer has exhausted her budget of \$5 and has arrived at the consumer equilibrium, where the marginal utilities per dollar spent are equal. The consumer’s equilibrium choice is to purchase 2 units of good 1 and 1 unit of good 2.

The condition for consumer equilibrium can be extended to the more realistic case where the consumer must choose how much to consume of many different goods. When there are N > 2 goods to choose from, the consumer equilibrium condition is to equate all of the marginal utilities per dollar spent,

subject to the constraint that the consumer’s purchases do not exceed her budget.

### CBSE Class 12 Commerce Economics Producer Behaviour and Supply

CBSE Class 12 Commerce Economics Part A Introductory Microeconomics : The consumer surplus (individual or aggregated) is the area under the (individual or aggregated) demand curve and above a horizontal line at the actual price (in the  aggregated case: the equilibrium price). If the demand curve is a straight line, the consumer surplus is the area of a triangle:

### Calculation from supply and demand

$CS = \frac{1}{2} Q_{mkt} \left( {P_{max} - P_{mkt}} \right)$

Where Pmkt is the equilibrium price (where supply equals demand), Qmkt is the total quantity purchased at the equilibrium price and Pmax is the price at which the quantity purchased would fall to 0 (that is, where the demand curve intercepts the price axis). For more general demand and supply functions, these areas are not triangles but can still be found using integral calculus. Consumer surplus is thus the definite integral of the demand function with respect to price, minus the definite integral of the constant function D(P)=Qmkt (i.e. PmktQmkt), from the market price to the maximum reservation price (i.e. the price-intercept of the demand function):

$CS = (\int_{P_{max}}^{P_{mkt}} D(P)\, dP)-P_{mkt}D(P_{mkt})$

The graph shows, that if we see a rise in the equilibrium price and a fall in the equilibrium quantity, then consumer surplus falls.

### Distribution of benefits when price falls

When supply of a good expands, the price falls (assuming the demand curve is downward sloping) and consumer surplus increases. This benefits two groups of people.
Consumers who were already willing to buy at the initial price benefit from a price reduction; also they may buy more and receive even more consumer surplus, and additional consumers who were unwilling to buy at the initial price but will buy at the new price and also receive some consumer surplus.

Consider an example of linear supply and demand curves. For an initial supply curve S0, consumer surplus is the triangle above the line formed by price P0 to the demand line (bounded on the left by the price axis and on the top by the demand line). If supply expands from S0 to S1, the consumers’ surplus expands to the triangle above P1 and below the demand line (still bounded by the price axis). The change in consumer’s surplus is difference in area between the two triangles, and that is the consumer welfare associated with expansion of supply.

Some people were willing to pay the higher price P0. When the price is reduced, their benefit is the area in the rectangle formed on the top by P0, on the bottom by P1, on the left by the price axis and on the right by line extending vertically upwards from Q0.

The second set of beneficiaries are consumers who buy more, and new consumers, those who will pay the new lower price (P1) but not the higher price (P0). Their additional consumption makes up the difference between Q1 and Q0. Their consumer surplus is the triangle bounded on the left by the line extending vertically upwards from Q0, on the right and top by the demand line, and on the bottom by the line extending horizontally to the right from P1.

### Rule of one-half

The rule of one-half estimates the change in surplus for small changes in supply with a constant demand curve. Note that in this special case where the consumer demand curve is linear, consumer surplus is the area of a triangle. Following the figure above,

$\Delta CS = \frac{1}{2} \left( {Q_1 + Q_0 } \right)\left( {P_0 - P_1 } \right)$

where:

• CS = Consumers’ Surplus
• Q0 and Q1 are the quantity demanded before and after a change in supply
• P0 and P1 are the prices before and after a change in suppl

### CBSE Class 12 Commerce Economics Forms of Market and Price Determination

CBSE Class 12 Commerce Economics Part A Introductory Microeconomics :  Here we provide CBSE Class 12 Commerce Economics Forms Of Market And Price Determination Complete notes. We gave here direct Download Links for CBSE Class 12 Commerce Economics Forms Of Market And Price Determination.

### CBSE Class 12 Commerce Economics Part A Introductory Microeconomics Complete Details

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