UNIT 1

INTRODUCTION
TO ECONOMICS:
 RESOURCES NEEDS
&
WANTS

The Word Economics derived from

Greek Work “OIKONOMIA” that
relates to household things.
ADAM SMITH: Father of Economics
WHAT IS ECONOMICS???

• An Economy is that branch of social science which is concerned with the study
of how individuals , household , firm , Industries & government take decision
relating to the allocation of limited resources to productive uses , so as to
derive maximum satisfaction.
• An Economy is a social science organism through which people make their
living. It analyses how human being choices in an effort to maximize utility.
 DEFINITIONS BY CLASSICAL & NEO CLASSICAL
ECONOMIST
Classical economist view:-
• “Economics makes inquiry into the factors that determine the wealth and growth of a nation”
-ADAM SMITH
• “Economics as the law that governs mankind in the production of wealth”
-J.B.SAY
Neo Classical Economist View:-
• “Economics is the study of mankind in the ordinary business of life ; It examines that part of individual and
the social action which is most closely connected with the attainment and the use of material well being.”
-ALFRED MARSHALL
MORDEN DEFINITION :
“Economics is the study of how people and society ed up choosing with or without the use of money, to
employ scare productive resources that could have alternative uses to produce various commodities over time
and distribute them for consumption how to make use in future.(Science of Dynamic Growth & Development)”
-PAUL A.SAMUELSON
BASIC PROBLEM OF AN ECONOMY
Consumer Goods

 WHAT TO PRODUCE?
Producer Goods

Labour Intensive Techniques

 HOW TO PRODUCE?

Capital Intensive Techniques

Personal Distribution
 FOR WHOM TO PRODUCE?

Functional Distribution
THE SCOPE OF ECONOMICS: ECONOMICS IS
ART AND A SCIENCE

 Economics is an ART : Because different theories and laws are explained with
the help of graphs,figures ,tables ,equations. And also because it is the practical
application of knowledge for achieving particular goals,
 Economics is a Science: Because It is also a systematic study of knowledge &
facts related with both micro & macro economics are systematically collected ,
classified and analysed. Economics deals with correlation between Cause And
effect.
 ECONOMICS

SCEINCE ART

POSITIVE NORMATIVE
SCIENCE SCIENCE
 POSITIVE SCIENCE NORMATIVE SCIENCE

• Defined A body of systematized knowledge concerning Defined as a Body of systematized knowledge

relating to
“ WHAT IT IS?” criteria “WHAT OUGHT TO BE?”
• Objective of Positive Science is the establishment of Objective Of Normative Science is
scientific laws. the determination of the ideals.
• Logical Based Moral & Ethical
• That can Prove Opinion Science(Economic Planning, Welfare
Activites)
ROLE OF ECONOMICS IN DECISION MAKING
1. Demand Analysis and Forecasting : A business firm is an economic organisation which transform
productive resources into goods to be sold in the market.
2. Cost and Production Analysis : A study of economic costs, combined with the data drawn from
the firm’s accounting records, can yield significant cost estimates which are useful for
management decisions.
3. Pricing Decisions, Policies and Practices : Pricing is an important area of business economics.
Price Determination in Various Market Forms, Pricing Method, Differential Pricing, Product-line
Pricing and Price Forecasting.
4. Profit Management : to find BEP
5. Capital Management : for investment decision
6. Competition in the market : To determine the business strategy.
CONCLUSION

• Economics is important for many areas of society. It can help

improve living standards and make society a better place.
Economics is like science in that it can be used to improve living
standards and also to make things worse. It partly depends on the
priorities of society and what we consider most important.
THANK YOU