BASICS OF ECONOMICS – CLASS 12 NOTES
1. Introduction to Economics
Economics is the study of how individuals, businesses, and
governments allocate scarce resources to satisfy unlimited wants. It is
divided into Microeconomics (study of individual markets) and
Macroeconomics (study of the economy as a whole).
2. Types of Economics: Micro & Macro
●Microeconomics: Focuses on individual consumers,
businesses, and industries (e.g., pricing of a product, consumer
behavior).
●Macroeconomics: Deals with the overall economic performance
of a country (e.g., GDP, inflation, unemployment).
3. Basic Economic Problems
Every economy faces three fundamental problems due to scarcity:
1. What to produce? (Choice of goods & services)
2. How to produce? (Use of resources and technology)
3. For whom to produce? (Distribution of output among people)
4. Opportunity Cost & Trade-offs
●Opportunity Cost: The value of the next best alternative
foregone when making a decision.
●Trade-offs: The balance between different choices due to limited
resources.
