| Latest Economics NCERT Notes, Solutions and Extra Q & A (Class 9th to 12th) | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 9th | 10th | 11th | 12th | ||||||||||||||||
| Class 12th Chapters | ||
|---|---|---|
| Introductory Microeconomics | ||
| 1. Introduction | 2. Theory Of Consumer Behaviour | 3. Production And Costs |
| 4. The Theory Of The Firm Under Perfect Competition | 5. Market Equilibrium | |
| Introductory Macroeconomics | ||
| 1. Introduction | 2. National Income Accounting | 3. Money And Banking |
| 4. Determination Of Income And Employment | 5. Government Budget And The Economy | 6. Open Economy Macroeconomics |
Latest Class 12th Economics NCERT Notes, NCERT Question Solutions and Extra Q & A
Introductory Microeconomics
1. Introduction
This chapter introduces the fundamental concepts of economics, with a focus on microeconomics. It defines economics as the study of how society manages its scarce resources. The central problem is the issue of scarcity—the fact that human wants are unlimited while the resources to satisfy them are limited. This scarcity forces individuals and societies to make choices. The chapter explains the three fundamental economic problems that every economy must solve: what to produce, how to produce, and for whom to produce. It introduces the concept of opportunity cost—the value of the next best alternative forgone when a choice is made. This is visually represented by the Production Possibility Frontier (PPF) or Production Possibility Curve (PPC), a graphical tool that shows the various combinations of two goods that can be produced with available resources and technology. The chapter distinguishes between a market economy, a centrally planned economy, and a mixed economy.
2. Theory Of Consumer Behaviour
This chapter delves into the decision-making process of a rational consumer. It explains how a consumer allocates their limited income among various goods and services to achieve maximum satisfaction. The chapter introduces two main approaches to analyze consumer behaviour. The first is Cardinal Utility Analysis, which introduces concepts like utility (want-satisfying power), marginal utility, and the Law of Diminishing Marginal Utility. The second, more modern approach, is Ordinal Utility Analysis, which uses the tools of indifference curves (showing combinations of two goods that give equal satisfaction) and the budget line (showing combinations a consumer can afford). The point where the budget line is tangent to the highest possible indifference curve represents the consumer's equilibrium. This analysis is then used to derive the consumer's demand curve and explain the Law of Demand, which states that, ceteris paribus, the quantity demanded of a good falls as its price rises.
3. Production And Costs
This chapter shifts focus from the consumer to the producer, analyzing the theory of production and costs. It introduces the production function, a technical relationship that shows the maximum output that can be produced from a given set of inputs. The chapter distinguishes between the short run (where some inputs are fixed) and the long run (where all inputs are variable). In the short run, it explains the concept of returns to a factor, embodied in the Law of Variable Proportions, which describes how output changes as one variable input is increased while others are held constant. In the long run, it discusses returns to scale. The second part of the chapter details various cost concepts, including total cost, fixed cost, variable cost, and the crucial concepts of average cost and marginal cost, which are vital for a firm's decision-making process.
4. The Theory Of The Firm Under Perfect Competition
This chapter examines how a firm makes output decisions in a specific market structure known as perfect competition. This market is characterized by a large number of buyers and sellers, a homogeneous product, free entry and exit of firms, and perfect information, which makes individual firms 'price takers'. The chapter defines revenue concepts like total, average, and marginal revenue. The central theme is the firm's profit maximization objective. The profit-maximizing level of output for a firm is determined by the condition where marginal cost equals marginal revenue (MC = MR), and MC is rising. The chapter analyzes the firm's short-run and long-run equilibrium and derives the short-run supply curve of a firm, which is the rising portion of its marginal cost curve above the minimum average variable cost.
5. Market Equilibrium
This chapter integrates the analysis of consumer demand and firm supply to explain how market equilibrium is achieved. It defines equilibrium as a state where the market clears, meaning the quantity of a good that buyers are willing to purchase is exactly equal to the quantity that sellers are willing to sell. The price at which this occurs is the equilibrium price, and the corresponding quantity is the equilibrium quantity. The chapter explains the concepts of excess demand (shortage), which occurs when the price is below equilibrium and pushes the price up, and excess supply (surplus), which occurs when the price is above equilibrium and pushes the price down. It also provides a detailed analysis of how the market equilibrium price and quantity change in response to shifts in the demand and supply curves due to various external factors.
Introductory Macroeconomics
1. Introduction
This chapter provides an introduction to macroeconomics, the branch of economics that studies the economy as a whole. It distinguishes macroeconomics from microeconomics by highlighting its focus on aggregate variables like national income, aggregate employment, the general price level (inflation), and economic growth. The chapter discusses the emergence of macroeconomics as a separate discipline following the Great Depression of the 1930s and the work of John Maynard Keynes. It provides a brief overview of the four major sectors of a modern economy: households, firms, the government, and the external sector. The chapter sets the stage for understanding how these aggregates interact and how governments can use macroeconomic policies to manage the economy, a key concern for policymakers in India.
2. National Income Accounting
This chapter deals with the crucial task of measuring a country's total economic output, known as National Income Accounting. It introduces the most important macroeconomic aggregate, the Gross Domestic Product (GDP), which is the market value of all final goods and services produced within a country's domestic territory in a given period. The chapter explains the three different methods for calculating GDP: the Product (or Value Added) Method, the Income Method, and the Expenditure Method, and shows why all three must yield the same result. It also defines other related aggregates like GNP, NNP, and discusses the difference between nominal GDP (at current prices) and real GDP (at constant prices). Finally, it critically evaluates the limitations of using GDP as a measure of social welfare.
3. Money And Banking
This chapter explains the functions of money and the role of the banking system in a modern economy. It begins by discussing the drawbacks of the barter system and how money solves these by serving three key functions: a medium of exchange, a unit of account, and a store of value. The chapter then focuses on the banking system. It describes the functions of commercial banks, with a special emphasis on their ability to create credit or money through the process of lending. The most important part of the chapter is the role of the Central Bank (the Reserve Bank of India - RBI in the Indian context). It details the RBI's functions as the issuer of currency, banker to the government, and controller of the money supply and credit through various monetary policy instruments like the repo rate, reverse repo rate, CRR, and SLR.
4. Determination Of Income And Employment
This chapter presents the Keynesian model for the determination of equilibrium income and employment in the short run. It is based on the principle that the equilibrium level of output in an economy is determined by the level of aggregate demand (AD). The chapter breaks down AD into its components: consumption (C), investment (I), government spending (G), and net exports (X-M). It introduces the consumption function and the concept of the marginal propensity to consume (MPC). The equilibrium is established where aggregate demand equals aggregate supply (AD = AS, or Y = AD). The chapter also explains the powerful concept of the investment multiplier, which shows how an initial change in autonomous spending (like investment) leads to a much larger change in the equilibrium level of income.
5. Government Budget And The Economy
This chapter analyzes the government budget as a key instrument of fiscal policy. It explains the structure of the budget, detailing its two main components: revenue budget (revenue receipts and revenue expenditure) and capital budget (capital receipts and capital expenditure). The chapter defines various measures of government deficit, including the revenue deficit, the primary deficit, and the most important measure, the fiscal deficit, which indicates the total borrowing requirements of the government. It discusses the objectives of the government budget, such as resource allocation, redistribution of income, and economic stabilization. The chapter highlights how the government can use its expenditure and taxation policies to influence the level of aggregate demand and economic activity, a process central to economic management in India (₹).
6. Open Economy Macroeconomics
This final chapter extends macroeconomic analysis to an open economy, which engages in economic transactions with the rest of the world. It introduces the Balance of Payments (BoP) account, a systematic record of all economic transactions between residents of a country and the rest of the world. The BoP is divided into the current account (which records trade in goods, services, and transfer payments) and the capital account (which records all international purchases and sales of assets). The chapter then explains the functioning of the foreign exchange market, where national currencies are traded. It discusses how the exchange rate is determined under different regimes, contrasting a fixed exchange rate system with a flexible (or floating) exchange rate system, and explains concepts like depreciation and appreciation of a currency.