| EEONOMY ToDo—_——____HOTS 2 —___— Beonomic problem tht led 10 the emergence of economics. “The subjoct mntter of economies revolves around the cote proler of rational sranagernent of routes. “eowomis deals with how limited resources ae etionaliy manged (or copsenly wis tthe miro a well a ceo lee. What does rational management of resources meas? Ar the micro Jed, means dae an incviden) conauner ics it rewutces (come or weal) ina manner tha he maximises his satan; an Hodvidl producer Coe fam) es his resources ina manne: that he waimiss his prot. Ac che macro kel it tear tate coun ss ie resousces (ntioal weal) in amar thacit amie ite oF GDP greet as wel soci] wel ‘With his balgrund in mind we can sow define econorkes as under fire to tntod wants) oa nar sch ut te eo lel a a | Cosine ae mace Me fasion end en utduat prods abe te ‘Rorinbehi profiad tthe rola covey abt achive ihe paste COP [potion ghee sot wefan iy, ne on tte thavecoom thesealy fon ust ofthe nc rr a mane seb tha he aa ge ‘atin tthe lie adsl gn sd the el f ‘onenlts sa abject io ah erator nanapeent nia sans suet fcimcreleanowicpeter tata eth eae: sunrises efi Seitgens poolmttheslecrotieewaraenna! actos the poe etal menses Settee tinh he eet eran Pr os fj eouc see sed fesutar ove aerate, td mean tonal marae feu? RES cron of rues nDles cpt meta ofcescuees hey cate eatin of Fare Sarthe mic eve tear an dbl emer wes Nereus m9 are at he (etic hs sn, rd od peer wanes sees ns rea hat he mines ERD he maven couse trots norms that hee DF (Pen semanie, sedi sosivnteeeraumied Microeconomics and Macroeconomics Teonomics is broadly divided into wo parte () Mictosconomis, nd ip Macrosconomic, Following i a brief desedpon of ico and wc ‘onceps of ecoomics Microeconomics ‘Micro means sl Micoecomoris dels wih economies elated to small economic wots: () a0 fnvidval consumes, (i) am individ prodcc- (i) an individ! frm, Go) an indies! iadusery, and (9) an indvial mask ‘A consumes is am importers economic unit io the conte of rmirogconemic. He fees the problem of choice (te problem of rato arr: of ror He Bw me bs is done) on he mihi tor ae Lede Gooey commie Gol ee ssl pug ensue tou! rete oe Bee pte oman utente he lon ote Heke ae eel etc och ne me ne Se end oer pees 2 Senin ay 2 urls pine aceceeeee ae Seo Re fede am ae “fen weigh heya Dende nae sani tal hl Se ae Se Ses eset ei yo me ie se byes a Far Sey Meccan le eps ogee ed oT Sic Oana teas da on ee Sette ae a ics Teen Ss cul uw am wp hee compre wooo nde Vital Components of Microeconomics (1) Theory of Consumee Beaviour: rns haw a consumer aces istnome 1 dfeent ero chache masiies his stseton (2) Theory of Producer Behaviour carlyct wa produce decide what 1 produce and how euch, he produce focuses on che masimisaton fro. (9) Theory of Price estas how pues of gous ae evened inthe saarket OF thes he cheony oF ple I the mee inportan soraponent Cf mlccaanomics. So much, tat the economist often heat nctoeconorsics with the Teor of Pies ‘Macroeconomics Mz means ge Te eonorsie ge’ meas the economy aa wile Macossonomics dee with economic ses slated eo the ecomomy 23 viol The basic issues preblere svded bythe economists a te act) Teel a lke the prblens of employment, GDP growth, end scone sbi, Macevconomics so dale with—money auply (and ctdie revion), government budget, exchonge sve Cond Ba), monesty snd Fal plies. ‘Vial components of microsonimi ors unde: Vital Components of Macroeconames (1) Thea tclatcd to Eqilibam Lev of Output and Eoplaymient tule ton eqtibrm itackwoe SCAB(2) Theory elated‘o Inflationary snd Deflationary Ic stules how depareure from fall employment eles ourpat ‘ter inftionary ap of dellasanaty gap. (9) Fiscal and Monetary Policies: These rela o budgetary messes and monecary meanines,respectivey 9 comet ee tuations of infaionary and dflionary ep, Money Supply and Credit Creation: Ie sudies the components of money supply and how commercial banks add to money sappy dough credircretton (6) Government Budgets I focus on the measurement and impact of budgetary dec inthe economy. (6) Bechange Rate and BoP (Balance of Payments): It analyses how ‘achange ates deermined and how BoP impact she level of eanonsc svi in the domestic economy. dy ~Aeressea ad Macrae ROR (0 ered sal cmon ar| aca te el of he anya ‘tai niin] we | (0) Merooonomis is toi concrnd| (4) Macreconomes & bast coneered "The Thoory of Pri ™“ te whole, According toe c | (ly Seaty of microconaice sumer ta | (4 Sey of macroeconomic asus et conan and Ezenary Read th fllowing observations cael: (W On the eve of independence, poverty in Tndla fected lvger percentage of population an nv (i fan observation rested to the pas) (G9 22% of popution i India is abeoiely poor (below povery line) Gris an obvervaton elated to the resend) (i If population in india continues to grow atthe existing rae the percentage of populacon blow porery ine will exeed 2296 he your 2000 Gr isan observation elated othe Future Al sheseobservionsltarerents ate cements of postive economics. “These oberon highligh dhe nae of poverty inthe past, present and she facut. Ths, positive economics the economics of what was, wha and ‘what would be Characteristics of Positive Statements ‘Obveraion/Staremeat eared eo postive economies show che following characteristic CO Those statement highlghe the nature and extent of economic problems or analyse the economic behaviour of dhe people reled fo pet present o irre, (i) These satemencs are based on facts and Sigues reed 0 pst preset or Fue (Gi) These sateen are veable for wuth (Fics an figures can be veted), and () These statements do noe lect any vale judgement oF opinion of the economists hich ould be mater of debate) Generminton of rie the ndbiua!|theleelfGDPIn the coor ir ] | thee steer erable frtrth Examples Somebody mig tate that he perce consumption (1 mnaplconpones otro] (Pine cmeonmemacexsans| Ser) may of come Bo | ” re ayradarntonl| ‘hoop 9 Boone: | of pat Eon ery (2) mcry arbre | mtd infty and Deion) | Gap ne teen) foe ol | bance Seg | Grief on Bae | i dB a | | 3. Positive and Normative Economics Positive Economics Positive sconemic deals with economic asc or economic beavis) reared to pss, present Fe. eels wit such conomiesiuations which an be said by using Fs and figures. (losin Ind as roe overtime Ti cra apo atement at ths Biccan very Normative Economics ‘Noimatve economics i the sconomics of what oughe so be Ie deals with ‘opinion? of the economies relate to economic sues ot ennomle problems, Different economists mayofe diferent opinions onthe solution to an economie problem. Opinions involve vale judgemens, Read he flowing sstement cael () MGNREGA (Mahatma Gandhi Navomal Rural Employment Goarance Ac) will one day bring an end co the problem of pana in the country. IREGA sus prgramime financial adv the uacrplored poop in rural Inds, J will make dhe people paras and if Fong anpeedctve. eonIneducon Merosconomics (il) MGNREGA uses axpayen! money, and should therefore, be stopped (9) MGNREGA shoul norbe puried unlit ensure tet-ctaton i the exomony. All these satemens are element of normative economics. These ate reel opinions, These arent veil fo rath ‘Characteristics of Normative Statements bse folowing characteristics (0 These statements involve value judgement. (a) These siemens lead co contoverin and debates, atton/Satemencs related wo normative economics show the (Gi) These feet indicate opinions and are therefore, nor veifable fa euth () These statements flee 'Wwhat ought tobe, ar aznlation economic problems ansconomic problem Example: fer independence, the economists dectde oie publ sete a priory tar the pie scar in he sone of rth and derlpmes of te eonong: Bena, Me ploy wes ovo Norn anomie fens ‘irecte emis there =F Festive economies deals with economic tes (or econo bore) rad | ‘apr psn andere (wy speementsofpasve economic aloe 17 acs whet an he woul 49 Statement of post zumpe Sono 9 popula | oft ner han pation | riot ut rong One caver (i cts and fiers (ez: |p we Prehegmre ements of| () Norma stomens are not veritable a eee ee DSxtenens of noms rete wha ough 2 conomics on) Normate statment conn etme 1 ta rasa Thre etme ob xample:Somsboiy says thot alge ‘ents sod be oped Ist an | Seaemane canoes mar va People perform diferent economic activites o ear thir living, The teachers goto the schol, she doctors gp to the hospital the Farmers go #9 thei elds and che indus go t thee indies. The nate and level of economic activites performed bythe people of an area would reveal a ‘grt by which people ofthat area eam thei living. This system is called 5. Nature and Level of Economy The sytem (by wh basic element people af an aea ear the Hiving)incades so (@) Nazar ofeconomse activites performed by che people, and i Level of economic activities peformed bythe people Nature of economic avis reves the nature of the economy, and the level of economic scivites reveal the lev (rsa) of (whether iis developed or underdeveloped). Let ue consider villge. We may fnd that aor people in the willage are engaged in agricultural atsisy «wea cel iving, Accordingly, we shall conelade that she economy ofthis vilge ian ageclaral economy. This is abo she mature ofthe economy. Pures, we may Bind tha most farmers in the village at ich ures. They perform high eve of production activity. Aconding) we shall conclce chat the economy ofthis village i sich economy or «developed economy. This isabout the nate of che eon ‘Types of Economies Econom scivs (activi of production, consumpion, ivexment and exchange) ate controlled or regulated bythe government ofa eountry. Bat the degree of concrl varies across diferent nations. In China, Rosia and North Korea, the degce of conuol is very high- Such economice where the dice of conte ff economic actives) every high ae called ‘Controlled Economic’ ot'Centilly Planned Economics. Socond thee ae economies where the degre of conus notional (rer lo). Tes rca "ree Economie’ or ‘Market Economies, Economies of USA and UK are xampler. Third, there ze economier where the depres of contol s moderate (eeiher very high noe very low). Thee are called Mined Economic India Iban czample. iss Glows Detaled desetipeon ofthese econoCentrally Planned Economy, Market Boonomy and ‘Mined Economy Ihe Differece at Ih | Free Benomy | | Stlaned teonomy | Beonomy ce eaen| cor ee] so fy ly | | Steady S| ncdeesrsore| (1 Eeonomie decions oe socal were | profemainaon | Sot pre maxmisaon revon bythe motive | my theme of| driven by the mate. of| Foun (nd sel ware soe mt | Tec 0 acme ree decides whae| consumer buys goods | Diserbution Sate) sures | grodrorenbepreduced| ccordingtolschote | the supply of eset | forehepept)| ‘nds the consumers. mma eco | (0) Moe se | fn recat te gore The | by. the people. The | andbythepeople Prizsare| | ‘erent dees at| markt dturmines the | determined y the mare. | tratpethe geod ere | ris of grt and |” te” gourmet fobezldinthemartet | Seve, repulse te | | | | sere nto by rm centr story EIEXeRCISE_—_E 1. Very Short Questions (Remembering & Understanding) (J. mark each) ‘A. Multiple Choice Questions: Choose the Correct Answer 4. Which of the folowing nat concerned with the problem of colce? (0 Biesene income (0) Aernatve wse of resources (©) Unised wants (a) Lites scarce resources, 2. Principal charactrsts of resourees are: ia) they are sare nrelston to cur sends (b thayhove aerate uses 7 (a none of nese 2: Inwhich ofthe following sins, does Searcy ase? {s) Supply of recources> Demand for resources (b)Suppy of resources