Two types of economic
1. Microeconomics
2. Macroeconomics
🔹 What is Microeconomics?
Microeconomics studies individual parts of the economy—like people, businesses, and
markets.
It focuses on small-scale economic activities.
Examples:
How a person decides to spend money
How a business sets prices
How supply and demand affect the price of rice
🔹 What is Macroeconomics?
Macroeconomics studies the whole economy of a country or the world.
It focuses on large-scale economic activities and overall performance.
Examples:
National unemployment rate
Inflation and interest rates
Economic growth (GDP)
Government budgets and taxes
🔸 Key Differences Between Micro and Macro Economics:
Feature Microeconomics Macroeconomics
Focus Individual units (people, firms) Whole economy (country, world)
Scope Small-scale decisions Large-scale performance
Prices, supply & demand, consumer GDP, inflation, unemployment,
Deals With
behavior policies
Feature Microeconomics Macroeconomics
Example Why is the country’s inflation
Why did the price of eggs go up?
Question rising?
The 10 principles of economics:
🔹 A. How People Make Decisions (1–4)
1. People face trade-offs
2. The cost of something is what you give up to get it
3. Rational people think at the margin
4. People respond to incentives
🔹 B. How People Interact (5–7)
5. Trade can make everyone better off
6. Markets are usually a good way to organize economic activity.
7. Governments can sometimes improve market outcomes
🔹 C. How the Economy Works as a Whole (8–10)
8. A country’s standard of living depends on its ability to produce goods and services
9. Prices rise when the government prints too much money
10. Society faces a short-run trade-off between inflation and unemployment.
Principles for 1 to 10 and their examples
🔹 Principles 1–4: How People Make Decisions
1. People Face Trade-Offs
You can’t have everything at once.
Choosing one thing means giving up something else.
Example:
If you choose to watch a movie, you might miss time to study. That’s a trade-off.
2. The Cost of Something Is What You Give Up to Get It
This is called opportunity cost.
It means you must consider what you’re giving up when making a choice.
Example:
If you spend 3 hours gaming, your opportunity cost could be studying or working.
3. Rational People Think at the Margin
Rational people make decisions by comparing extra benefit vs. extra cost.
“At the margin” means making small changes or adjustments.
Example:
A factory deciding whether to produce one more unit of a product will think:
“Will it bring in more profit than it costs?”
Sunk cost: A cost that does not vary with one’s choices.
4. People Respond to Incentives
Incentives are things that encourage or discourage behavior.
People change actions based on rewards or punishments.
Examples:
If oranges go on sale, people buy more = positive incentive.
If you’re fined for littering, you stop = negative incentive.
🔹 Principles 5–7: How People Interact
5. Trade Can Make Everyone Better Off
Trade allows people to specialize and exchange what they’re good at producing.
Everyone can benefit from trade, even if one is better at everything.
Example:
Bangladesh exports garments and imports oil. Both sides gain.
6. Markets Are Usually a Good Way to Organize Economic Activity
In a free market, buyers and sellers decide what to produce and buy.
Prices act as signals that help guide decision-making without government control.
Example:
If many people want mangoes, their price goes up, and farmers grow more mangoes.
7. Governments Can Sometimes Improve Market Outcomes
Sometimes the market fails (called market failure).
Government can help fix problems like pollution or unfair wealth.
Examples:
Taxing pollution to protect the environment.
Providing education and healthcare.