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M Manjunath Shettigar
MA (Econ), MBA, MPhil, PhD
Professor,
Department of Professional Studies,
Christ University,
Bangalore - 560029
Economics is a discipline/
subject / a field of study which
is concerned with
management of scarce
resources.
Economics is the study of how
scarce resources can be used
for different uses/purposes by
making rational/efficient
choices at the levels of
households, institutions and the
whole society.
Economics is the study of
how scarce resources can be used
for different uses/purposes by
making rational/efficient choices at
the levels of households, institutions
and the whole society
and how the process can be
managed so as to secure
maximum benefit
Scarcity
of resources is a universal
problem present everywhere, for all
of us and at all times.
Attributes/features of resources
A. Resources are scarce
B. Resources have alternative uses
Becauseresources are scarce and
they have alternative uses on the one
hand, &
Becausehuman needs, wants &
requirements are unlimited
Adam Smith
is considered the father of Economics
Economics
Two essential problems involved in the use of resources
are:
Basic concepts
Production, consumption, Goods and services
Production
Making of goods and services required
to satisfy wants
With the application of human and natural energy
Assumptions/ conditions
1. Identical units
2. No (inordinate) time gap
3. Consumer is rational/ normal
Law of diminishing
marginal utility
Units Total Utility Marginal Utility
1st glass 20 20
2nd glass 32 12
3rd glass 40 8
4th glass 42 2
5th glass 42 0
6th glass 39 -3
Law of diminishing
marginal utility
Trends in utility :
We can see the following trends in utility
1. Total utility goes on increasing at a diminishing rate with
the consumption of additional units.
2. Total utility is the highest when marginal utility is 0.
3. Total utility declines when marginal utility becomes
negative.
4. Marginal utility goes on diminishing with the consumption
of additional units.
Exceptions to the Law