01. Introduction to Economics
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References Internet Wikipedia Modern Economic Theory (K.K Dewett)
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Ô Whether to buy a car or not? Whether to have Ô for dinner tonight, or something else? Whether to marry your ______or some one else? Which course to study/ where to take admission? And many other decisions are related with economics
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Ô is the study of how individuals/society manages its scarce resources. â
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science which studies human behavior as a relationship between ends and scarce means which have alternative uses.³
means that available are insufficient to satisfy all wants and needs. Absent of scarcity and alternative uses of available resources there is no . The subject thus defined involves the study of as they are affected by incentives and resources. ù
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(from Greek prefix micromeaning "small" + "economics") is a branch of economics that studies how the individual parts of the economy, the household and the firms, make decisions to allocate limited resources (from prefix "macr(o)-" meaning "large" + "economics") is a branch of economics that deals with the performance, structure, behavior and decision-making of the entire economy, be that a national, regional, or the global economy . : Applies the tools of statistics to economic problems. '
ëife is full of choices. People make many choices everyday. Choices, often called decisions, vary in their difficulty. Regardless of the level of difficulty, all choices carry costs and benefits. Young children make many choices/decisions. Research reveals that they should begin to learn decision-making skills at an early age. ëearning basic economics concepts and principles fosters the development of good decision-making skills. Economics is the study of choice under scarcity. Our resources are limited, and our wants are unlimited (scarcity). Scarcity is the inability to satisfy all of our wants at the same time. We must make choices about how to use our limited resources.
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d ^ is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, ßean-Baptiste Say, David Ricardo, Thomas Malthus and ßohn Stuart Mill. â Publication of Adam Smith's × in 1776, has been described as "the effective birth of economics as a separate discipline. "The book identified land, labor, and capital as the three factors of production and the major contributors to a nation's wealth. Adam Smith (father of economics) defined economics as ³ ´. He emphasized the and of wealth as the subject matter of economics. |
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Takes into account only material goods. ·
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Considered economics as a dismal or selfish science. Defined wealth in a very narrow and restricted sense which considers only material and tangible goods. Have given emphasis only to wealth and reduced man to secondary place in the study of economics.
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d ^ According to A. Marshall ³Ô
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. Thus, it is on one side a study of wealthà and on otherà and more important side, a part of the study of man. ^ d Emphasize on material welfare as the primary concern of economics i.e., that part of human welfare which is related to wealth. Takes into account ordinary business of life ± It is not concerned with social, religious and political aspects of man¶s life. ëimited the scope to activities amenable to measurement in terms of money. |[ Economics is social science and not a study of isolated individuals
^ economics deals with the part of social welfare that can be brought directly or indirectly into relation with the measuring rod of money. It is the study of causes of material welfare. Ô It is the study of general methods by which man cooperate to meet their material needs. l
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(1842 to 1924) was an English economist and one of the most influential economists of his time, being one of the founders of His book, ¦ Ô (1890), brings the ideas of supply and demand, of marginal utility and of . the costs of production into a coherent whole. It became the dominant economic textbook in England for a long period.
Relationship between the quantity of a commodity that producers have available for sale and the quantity that consumers are willing and able to buy. the of a good or service is the utility gained (or lost) from an increase (or decrease) in the amount available of that good or service. the is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it. |'
^ d l Criticized for treating economics as a social science rather than a human science, Thus welfare definition restricts the scope of economics to the study of persons living in organized communities only. It addresses only material welfare of man & neglects immaterial welfare. Welfare definition was advertised as extensions and refinements of Classical Definition Quantitative measurement of welfare
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ëionel Robbins led a frontal attack on the Marshallian view. |>
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According to ëionel Robbins (1898 - 1984) Ô
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³True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made.´
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According to Prof. Samuelson (May 15, 1915 ± December 13, 2009) ³Economics is the study of how men and society choose with or without the use of money, to employ the scarce productive resources which have alternative uses, to produce various commodities over time and distribute them for consumption now and in future among various people and groups of society.
Characteristics of Growth Oriented Definition: The definition is not merely concerned with the allocation of given resources but also with the expansion of resources, tries to analyze how the expansion and growth of resources to be used to cope with increasing human wants. More dynamic approach. According to him problem of resource allocation is a universal problem whether it is a better economy or an exchange economy. Definition is comprehensive in nature as it is both growth oriented as well as future oriented. |
l Even today economist don't agree on any one definition of economics. Thus every time we face a dilemma therefore Prof. Viner defined Ô
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ë Factors of production are the resources that are used to produce goods and services: : (economically referred to as or raw materials) The things created by acts of nature such as land, water, mineral, oil and gas deposits, renewable and nonrenewable resources.
are ones that can be replenished or reproduced easily. like sunlight, air, wind, etc., are continuously available and their quantity is not affected by human consumption. Many renewable resources can be depleted by human use, but may also be replenished. Some of these, like agricultural crops, take a short time for renewalà others, like water, take a comparatively longer time, while still others, like forests, take even longer. are formed over very long geological periods. Minerals and fossil fuels are included in this category. Since their rate of formation is extremely slow, they cannot be replenished once they get depleted. Of these, the metallic minerals can be re-used by recycling them. But coal and petroleum cannot be recycled. ]
§ The human effort, physical and mental, used by workers in the production of goods and services.
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All the machines, buildings, equipment, roads and other objects made by human beings to produce goods and services. Capital goods may be acquired with money or financial capital. Õ
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refers to the stock of competences, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience. The effort to coordinate the production and sale of goods and services. Entrepreneurs take risk and commit time and money to a business without any guarantee of profit. Entrepreneurs assemble resources including innovations, finance and business acumen in an effort to transform innovations into economic goods. [
(What is? What was? What will be?) ± actual happenings. ¦
is the branch of economics that concerns the description and explanation of economic phenomena. - ëahore is an over-populated city. - Prices in Pakistani economy are constantly rising. b. (What ought to be? What ought to have been?) is the branch of economics that incorporates value judgments about what the economy like or what particular policy actions to achieve a desirable goal - Fundamental principle of economic development should be the development of rural areas of Balochistan. ù - Agricultural income should also be taxed.
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d What should the economy produce efficiently in order to satisfy wants as best as possible using the limited resources available with alternate options. It also implies between allocation of resources between different type of goods: Consumer goods and capital goods (Consumer goods are finished products whereas capital goods are bought as an investment to help produce something else include factories, machinery, tools, & equipment etc. ) ëabor intensive vs. capital intensive ë How the national product be distributed ? who should get how much? Should the economy produce goods targeted towards those who have high incomes or those who have low incomes. § How to achieve efficiency of resource and how to ensure further growth and development in the economy. § fullest possible use of all resources ' including labor & other resources.
An is the system of production, distribution and consumption of goods and services of an economy. It is the set of principles and techniques by which problems of economics are addressed, such as the economic problem of scarcity through allocation of resources.
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Capitalism: It is the economic system based on the principle of private ownership of factors of production which include natural resources and capital. Government control over the economic activities of the people is minimum. people have much freedom to make choices about consumption, production, and making contracts. Full capitalism is not found in any country. Capitalism is also called Market economy, free economy or price system.
A theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole. The government in a planned way, decides what is to be produced in the country. Means of production such as farms, factories, shops etc are owned by government. It is also called marxism. ]
Mixed economy
Features of both capitalism and socialism are found side by side. A part of industry, trade, energy, transport and communication, is controlled by the government while private sector is also quite strong.
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p is accordance with Islamic law. People have freedom to produce and consume goods but within the limits prescribed by the Holy Quran and Hadith. E.g. following Islamic law in regards to spending, saving, investing, giving, etc ]
§ë ' ( Show the different combinations of goods and services that can be produced with a given amount of resources Any point inside the curve ± suggests resources are not being utilised efficiently Any point outside the curve ± not attainable with the current level of resources Useful to demonstrate economic growth and opportunity cost ]]
When the economy is at point , resources are not fully employed and/or they are not used efficiently.
Point is desirable because it yields more of both goods, but not attainable given the amount of resources available.
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The PPF curve is bowed out because resources are not perfectly adaptable to the production of the two goods. As we increase the production of one good, we sacrifice of the other.
To increase the production of one good without decreasing the production of the other, the PPF curve must shift outward. ]ù
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The PPF curve shifts outward as a result of: 1.
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An increase in the economy¶s resources, or A technological innovation that increases the output obtained from a given amount of resources. ]'
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From point , an additional 200 tons of factory goods or 20 tons of farm goods are now possible (or any combination in between). ]>
The ^ consists of two directed lines that perpendicularly intersect their respective zero points.
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