SlideShare a Scribd company logo
1 of 27
Nature and
Scope of
Economics
By
Arihant Jain
Introduction
• The word Economics is derived
  from the Greek word ―OKIOS
  NEMEIN‖ meaning household
  management
• Man is a bundle of desires. Goods
  and services satisfy these wants.
  But almost all the goods are scares
• To produce goods factors of
  production are needed and these
  are all scarce
      5/5/2012    Arihant Jain P.G.D.M.   2
The Study of Economics
• Economics is the study of how
  individuals and societies choose to
  use the scarce resources that
  nature and previous generations
  have provided.
• It is the study of economic
  problems. Wants are motive for
  economic activity. Wants leads to
  efforts and which lead to
  satisfaction
      5/5/2012    Arihant Jain P.G.D.M.   3
Why Study Economics?
• To learn a way of thinking
• Three fundamental concepts:
   – Opportunity cost
   – Marginalism, and
   – Efficient markets




      5/5/2012     Arihant Jain P.G.D.M.   4
Contd…
    Opportunity Cost
    • the best alternative that we forgo, or give up, when we make a
      choice or a decision
    • arises because time and resources are scarce.



    Marginalism
    • In weighing the costs and benefits of a decision, it is important to
      weigh only the costs and benefits that arise from the decision




    Efficient Market
    • is one in which profit opportunities are eliminated almost
      instantaneously
    • Profit opportunities are rare because, at any one time, there are
      many people searching for them

               5/5/2012              Arihant Jain P.G.D.M.              5
Economic Definitions
• Adam Smith gave the Wealth
  Definition
• Alfred Marshall gave the Welfare
  Definition
• Lionel Ribbons gave the Scarcity
  Definition
• Paul Samuelson gave the Growth
  Definition

      5/5/2012   Arihant Jain P.G.D.M.   6
Wealth Definition
• Adam Smith (Father of Economics)
  in his book ―Wealth of nations
  1776‖ defined economics is the
  study of wealth
• J.B. Jay, J.S. Mill, Walker, B Price
  all agreed with Adam Smith
• In this definition wealth is given the
  first place and man is given the
  second place
      5/5/2012      Arihant Jain P.G.D.M.   7
Meaning of wealth
• Around the industrial revolution, merchants
  were the most powerful class in Western
  Europe, and wealth for them meant money
  only. Since money at that time was in the
  shape of gold, merchants declared gold as the
  only wealth,
• This definition rendered merchants as the only
  productive class, as they created it by trade,
• This definition harmed the interests of newly
  emerging class of petty industrialists and their
  hard working workers,
• Adam Smith as spokesman of the emerging
  class widened the definition to include all
  material goods,
• Activities which did not result in material goods
  production were unproductive.
         5/5/2012         Arihant Jain P.G.D.M.       8
Causes of wealth of
nations: Capitalism
•      Traders were not the only cause of wealth,
•      Freedom of trade and enterprise were the greatest
       causes of wealth because:
i)     Human beings are born selfish
ii)    They have self interest,
iii)   It is not the benevolence but self interest which guides
       economic activity
iv)    So left to themselves, each individual would maximise
       his self interest (income/wealth),
v)     When all the adult citizens of a nation maximise their
       self interest, the wealth of nation would grow the
       fastest,
vi)    So why should the mercantilists or anybody else
       impose restriction on the freedom of individuals,



           5/5/2012            Arihant Jain P.G.D.M.          9
Exceptions (Criticism)
• While an invisible hand guides
  societies which rely on self
  interest, there are certain
  exceptions where it does not work.
  These are:
• Defense
• Public utilities
• Law order and justice

      5/5/2012    Arihant Jain P.G.D.M.   10
Science of welfare
• Adam Smith’s prophesy that self interest would be
   beneficial to all did not materialise after the industrial
   revolution,
• The revolution divided the society between haves and
   have-nots, including unemployd
• Criticism turned reformist and revolutionary,
• Marshall attempted to offer a compromise and a new
   definition:
― Political economy or economics is the study of mankind in
   the ordinary business of life; it examines that part of
   individual and social action which is most closely
   connected with the attainment and with the use of the
   material requisites of well-being‖.

  ― The range of our enquiry becomes restricted to that part
   of social welfare which can be brought directly or
   indirectly into relashhionship with measuring rod of
   money‖, Pigou.
          5/5/2012            Arihant Jain P.G.D.M.         11
Criticism of welfare
definition
• Economics is not restricted to material
  things, non material things like health and
  education, entertainment are also important,
• Welfare is subjective and varies from person to
  person,
• It is difficult to segregate material welfare from
  other types of welfare,
• The concept of welfare is not fixed but subject
  to change and interpretation,
• It differs from time to time, country to country



        5/5/2012         Arihant Jain P.G.D.M.     12
Science of scarcity
•    According to Lionel Ribbons Economics is
     ―the science which studies human behavior
     as a relationship between ends and scarce
     means which have alternative uses‖. So all
     goods and services commanding a price fall
     under the scope of economics.
•    Unlimited human wants:
     Necessities, comforts and luxuries’
•    Necessities:
a)   Necessities of existence
b)   Necessities of efficiency, and
c)   Necessities of convention.

        5/5/2012        Arihant Jain P.G.D.M.     13
Contd…
• Comforts and luxuries are :
• A) Related to time, place
• B) No watertight compartmentalization as a
  luxury may be comfort or even a necessity for
  someone or at different periods of history.

• Criticism;
• It fails to explain why labour despite being
  scarce remains unemployed / underemployed
• It also fails to explain situations of abundance
• Is neutral to ends
• Ignores welfare

        5/5/2012         Arihant Jain P.G.D.M.       14
Science of growth and
development
• ―Economics is the study of how men and
  society chose, with or without the use of
  money, to employ scarce productive
  resources which could have alternative
  uses, to produce various commodities
  over time and distribute them for
  consumption now and in future amongst
  various people and groups of society‖



       5/5/2012      Arihant Jain P.G.D.M.   15
The Scope of Economics
• Microeconomics is the branch of
  economics that examines the
  functioning of individual industries and
  the behavior of individual decision-
  making units—that is, business firms
  and households.
• Macroeconomics is the branch of
  economics that examines the economic
  behavior of aggregates—
  income, output, employment, and so
  on—on a national scale
       5/5/2012      Arihant Jain P.G.D.M.   16
The Diverse Fields of Economics
         Examples of microeconomic and macroeconomic concerns
                 Production              Prices                  Income                Employment

Microeconomics   Production/Output       Price of Individual     Distribution of       Employment by
                 in Individual           Goods and Services      Income and Wealth     Individual
                 Industries and                                                        Businesses &
                 Businesses              Price of medical        Wages in the auto     Industries
                                         care                    industry              Jobs in the steel
                 How much steel          Price of gasoline       Minimum wages         industry
                 How many offices        Food prices             Executive salaries    Number of
                 How many cars           Apartment rents         Poverty               employees in a firm



Macroeconomics   National                Aggregate Price         National Income       Employment and
                 Production/Output       Level                   Total wages and       Unemployment in
                                                                 salaries              the Economy
                 Total Industrial        Consumer prices
                 Output                  Producer Prices         Total corporate       Total number of
                 Gross Domestic          Rate of Inflation       profits               jobs
                 Product                                                               Unemployment
                 Growth of Output                                                      rate



                              5/5/2012                         Arihant Jain P.G.D.M.                     17
The Method of
Economics
• Positive economics studies economic
  behavior without making judgments. It
  describes what exists and how it works.
• Normative economics, also called
  policy economics, analyzes outcomes of
  economic behavior, evaluates them as
  good or bad, and may prescribe courses
  of action.



      5/5/2012      Arihant Jain P.G.D.M.   18
Contd…
• Positive economics includes:
  – Descriptive economics, which
    involves the compilation of data that
    describe phenomena and facts.
  – Economic theory, which involves
    building models of behavior.
     • An economic theory is a general
       statement of cause and effect, action and
       reaction


      5/5/2012        Arihant Jain P.G.D.M.    19
Contd…
• Empirical economics refers to the
  collection and use of data to test
  economic theories.
• Many data sets are available to
  facilitate economic research. They
  are collected by both government
  agencies and private companies,


      5/5/2012   Arihant Jain P.G.D.M.   20
Criteria for judging
economic outcomes
• Economic growth, or an increase in the
  total output of an economy.
• Economic stability, or the condition in
  which output is steady or growing, with low
  inflation and full employment of resources.
• Efficiency, or allocative efficiency. An
  efficient economy is one that produces
  what people want at the least possible cost
• Equity, or fairness of economic outcomes


       5/5/2012       Arihant Jain P.G.D.M.   21
Economic System
• The manner or the structure through
  which the economy of a country
  operates is known as Economic System
• Variety of Economic Systems
• They differ from each other not only in
  details but also in broader outlines
• Types of Economic Systems:
  – Capitalist
  – Socialist and
  – Mixed Economy
       5/5/2012     Arihant Jain P.G.D.M.   22
Capitalism
• All economic activities are guided
  by market forces
• Policy of laiseez-faire (absence of
  state intervention). Privately owned
  resources
• What to Produce, how to produce
  and for whom to produce power
  rests with the producers
• Profit maximization is the main aim
      5/5/2012     Arihant Jain P.G.D.M.   23
Merits and Demerits
                       Capitalism


        Merits                                     Demerits




                Fast             Hides
   Self      impleme-             real        High rate of        Inequalities
             ntation of         need of      obsolescence
regulatory                                                         in income
              efficient           the                             and wealth
             decisions
                                society

                     5/5/2012             Arihant Jain P.G.D.M.            24
Socialism
• Originated due to drawbacks of
  capitalism
• Just opposite to capitalism
• The merits of capitalism become the
  demerits and merits thus become the
  demerits
• It aims at removing the inequalities of
  income and wealth, inequalities of
  economic opportunities, unemployment
  and waste of productive resources

       5/5/2012     Arihant Jain P.G.D.M.   25
Mixed Economy
• Merits of capitalism and Socialism
  are taken and a Mixed economy is
  formed
• Generally adopted by countries
  with low per capita income and is
  underdeveloped or is developing
  (India)
• Some sectors are kept in
  Government control
      5/5/2012    Arihant Jain P.G.D.M.   26
5/5/2012   Arihant Jain P.G.D.M.   27

More Related Content

What's hot

Introduction to Economics ,Nature and scope of economics
Introduction to Economics ,Nature and scope of economicsIntroduction to Economics ,Nature and scope of economics
Introduction to Economics ,Nature and scope of economics001Abhishek1
 
Basic Economic Concepts
Basic Economic ConceptsBasic Economic Concepts
Basic Economic ConceptsDan Ewert
 
Introduction to Economics
Introduction to EconomicsIntroduction to Economics
Introduction to EconomicsNikhil Mhatre
 
Macro Economics PPT
Macro Economics PPT Macro Economics PPT
Macro Economics PPT M Asif Bhat
 
Introduction to economics
Introduction to economicsIntroduction to economics
Introduction to economicsMichael Noel
 
Opportunity cost powerpoint
Opportunity cost powerpointOpportunity cost powerpoint
Opportunity cost powerpointagjohnson
 
Nature and scopes of Economics
Nature and scopes of EconomicsNature and scopes of Economics
Nature and scopes of EconomicsANKUR AGRAWAL
 
Ch. 1 micro and macro economics
Ch. 1 micro and macro economicsCh. 1 micro and macro economics
Ch. 1 micro and macro economicsManish Purani
 
Theories of economics
Theories of economicsTheories of economics
Theories of economicsPrashanth v
 
Production Possibility Frontier (Revision Presentation)
Production Possibility Frontier (Revision Presentation)Production Possibility Frontier (Revision Presentation)
Production Possibility Frontier (Revision Presentation)tutor2u
 
Microeconomics: Introduction and basic concepts
Microeconomics: Introduction and basic conceptsMicroeconomics: Introduction and basic concepts
Microeconomics: Introduction and basic conceptsPie GS
 
Macro vs Microeconomics
Macro vs MicroeconomicsMacro vs Microeconomics
Macro vs MicroeconomicseduCBA
 
Production Possibility Curve
Production Possibility CurveProduction Possibility Curve
Production Possibility CurveNeeti Naag
 
Meaning, definition, nature, scope, importance and limitation of macro econo...
Meaning, definition, nature, scope, importance and limitation of  macro econo...Meaning, definition, nature, scope, importance and limitation of  macro econo...
Meaning, definition, nature, scope, importance and limitation of macro econo...Ashutosh Deshmukh
 

What's hot (20)

Introduction to Economics ,Nature and scope of economics
Introduction to Economics ,Nature and scope of economicsIntroduction to Economics ,Nature and scope of economics
Introduction to Economics ,Nature and scope of economics
 
Basic concept of economics
Basic concept of economicsBasic concept of economics
Basic concept of economics
 
Basic Economic Concepts
Basic Economic ConceptsBasic Economic Concepts
Basic Economic Concepts
 
Introduction to Economics
Introduction to EconomicsIntroduction to Economics
Introduction to Economics
 
Types of economic system
Types of economic systemTypes of economic system
Types of economic system
 
Macro Economics PPT
Macro Economics PPT Macro Economics PPT
Macro Economics PPT
 
Introduction to economics
Introduction to economicsIntroduction to economics
Introduction to economics
 
Opportunity cost powerpoint
Opportunity cost powerpointOpportunity cost powerpoint
Opportunity cost powerpoint
 
Nature and scopes of Economics
Nature and scopes of EconomicsNature and scopes of Economics
Nature and scopes of Economics
 
Basic concepts of economics
Basic concepts of economicsBasic concepts of economics
Basic concepts of economics
 
Ch. 1 micro and macro economics
Ch. 1 micro and macro economicsCh. 1 micro and macro economics
Ch. 1 micro and macro economics
 
Theories of economics
Theories of economicsTheories of economics
Theories of economics
 
Production Possibility Frontier (Revision Presentation)
Production Possibility Frontier (Revision Presentation)Production Possibility Frontier (Revision Presentation)
Production Possibility Frontier (Revision Presentation)
 
The Economic System
The Economic SystemThe Economic System
The Economic System
 
Basic economics ppt
Basic economics pptBasic economics ppt
Basic economics ppt
 
Microeconomics: Introduction and basic concepts
Microeconomics: Introduction and basic conceptsMicroeconomics: Introduction and basic concepts
Microeconomics: Introduction and basic concepts
 
Macro vs Microeconomics
Macro vs MicroeconomicsMacro vs Microeconomics
Macro vs Microeconomics
 
Production Possibility Curve
Production Possibility CurveProduction Possibility Curve
Production Possibility Curve
 
Meaning, definition, nature, scope, importance and limitation of macro econo...
Meaning, definition, nature, scope, importance and limitation of  macro econo...Meaning, definition, nature, scope, importance and limitation of  macro econo...
Meaning, definition, nature, scope, importance and limitation of macro econo...
 
Economic System
Economic SystemEconomic System
Economic System
 

Viewers also liked

Definitions And Scope Of Economics 5
Definitions And Scope Of Economics  5Definitions And Scope Of Economics  5
Definitions And Scope Of Economics 5siraj2762268
 
Basic Concepts Of Economics
Basic  Concepts Of  EconomicsBasic  Concepts Of  Economics
Basic Concepts Of EconomicsGenny Nazal
 
Economics concepts for grade 11 learners
Economics concepts for grade 11 learnersEconomics concepts for grade 11 learners
Economics concepts for grade 11 learnersxolisa mbobo
 
Indifference curve analysis
Indifference curve analysis Indifference curve analysis
Indifference curve analysis s1712sam
 
Lecture 1 definitions and scope
Lecture 1 definitions and scopeLecture 1 definitions and scope
Lecture 1 definitions and scopekamran
 
1 hrly gs ch 01 solar system part 1
1 hrly gs ch 01 solar system part 11 hrly gs ch 01 solar system part 1
1 hrly gs ch 01 solar system part 1azmatmengal
 
Knowing Our Solar System
Knowing Our Solar SystemKnowing Our Solar System
Knowing Our Solar Systemsolarsystem27
 
Solar system (simple definition)
Solar system (simple definition)Solar system (simple definition)
Solar system (simple definition)Saeid Hossein Pour
 
Dignostic Tests of Applied Economics
Dignostic  Tests of Applied EconomicsDignostic  Tests of Applied Economics
Dignostic Tests of Applied EconomicsSuniya Sheikh
 
Diagnostic Test of Applied Economics
 Diagnostic Test of Applied Economics Diagnostic Test of Applied Economics
Diagnostic Test of Applied EconomicsSuniya Sheikh
 
General and Applied Economics
General and Applied EconomicsGeneral and Applied Economics
General and Applied EconomicsVisionary_
 
The Bangko Sentral ng Pilipinas and Microfinance: Recent Regulations and Issu...
The Bangko Sentral ng Pilipinas and Microfinance: Recent Regulations and Issu...The Bangko Sentral ng Pilipinas and Microfinance: Recent Regulations and Issu...
The Bangko Sentral ng Pilipinas and Microfinance: Recent Regulations and Issu...MABSIV
 
5 fundamental principles of economics
5 fundamental principles of economics5 fundamental principles of economics
5 fundamental principles of economicsPrem Raj Bhatta
 
Basic Problem of an Economy
Basic Problem of an EconomyBasic Problem of an Economy
Basic Problem of an EconomyManish Purani
 
Principles of economics
Principles of economicsPrinciples of economics
Principles of economicsBinoy Paul
 
Philippine financial-system.......
Philippine financial-system.......Philippine financial-system.......
Philippine financial-system.......Sowie Althea
 
Fundamentals of economics
Fundamentals of economicsFundamentals of economics
Fundamentals of economicsRahul Kataria
 

Viewers also liked (20)

Definitions And Scope Of Economics 5
Definitions And Scope Of Economics  5Definitions And Scope Of Economics  5
Definitions And Scope Of Economics 5
 
Basic Concepts Of Economics
Basic  Concepts Of  EconomicsBasic  Concepts Of  Economics
Basic Concepts Of Economics
 
Applied Economics
Applied EconomicsApplied Economics
Applied Economics
 
Abm applied economics cg 4
Abm applied economics cg 4Abm applied economics cg 4
Abm applied economics cg 4
 
Economics concepts for grade 11 learners
Economics concepts for grade 11 learnersEconomics concepts for grade 11 learners
Economics concepts for grade 11 learners
 
Indifference curve analysis
Indifference curve analysis Indifference curve analysis
Indifference curve analysis
 
Lecture 1 definitions and scope
Lecture 1 definitions and scopeLecture 1 definitions and scope
Lecture 1 definitions and scope
 
1 hrly gs ch 01 solar system part 1
1 hrly gs ch 01 solar system part 11 hrly gs ch 01 solar system part 1
1 hrly gs ch 01 solar system part 1
 
Knowing Our Solar System
Knowing Our Solar SystemKnowing Our Solar System
Knowing Our Solar System
 
Solar system (simple definition)
Solar system (simple definition)Solar system (simple definition)
Solar system (simple definition)
 
Dignostic Tests of Applied Economics
Dignostic  Tests of Applied EconomicsDignostic  Tests of Applied Economics
Dignostic Tests of Applied Economics
 
Diagnostic Test of Applied Economics
 Diagnostic Test of Applied Economics Diagnostic Test of Applied Economics
Diagnostic Test of Applied Economics
 
General and Applied Economics
General and Applied EconomicsGeneral and Applied Economics
General and Applied Economics
 
The Bangko Sentral ng Pilipinas and Microfinance: Recent Regulations and Issu...
The Bangko Sentral ng Pilipinas and Microfinance: Recent Regulations and Issu...The Bangko Sentral ng Pilipinas and Microfinance: Recent Regulations and Issu...
The Bangko Sentral ng Pilipinas and Microfinance: Recent Regulations and Issu...
 
Introduction to social science
Introduction to social scienceIntroduction to social science
Introduction to social science
 
5 fundamental principles of economics
5 fundamental principles of economics5 fundamental principles of economics
5 fundamental principles of economics
 
Basic Problem of an Economy
Basic Problem of an EconomyBasic Problem of an Economy
Basic Problem of an Economy
 
Principles of economics
Principles of economicsPrinciples of economics
Principles of economics
 
Philippine financial-system.......
Philippine financial-system.......Philippine financial-system.......
Philippine financial-system.......
 
Fundamentals of economics
Fundamentals of economicsFundamentals of economics
Fundamentals of economics
 

Similar to Nature and scope of economics

Natureandscopeofeconomics 120505234644-phpapp02
Natureandscopeofeconomics 120505234644-phpapp02Natureandscopeofeconomics 120505234644-phpapp02
Natureandscopeofeconomics 120505234644-phpapp02DeShawn A. Larkin
 
managerial economics Introduction.pptx
managerial economics  Introduction.pptxmanagerial economics  Introduction.pptx
managerial economics Introduction.pptxDejeneDay
 
Introduction of Microeconomics (2).pptx
Introduction of Microeconomics (2).pptxIntroduction of Microeconomics (2).pptx
Introduction of Microeconomics (2).pptx0129OsmanGoni
 
Topic 1 - Microeconomics - Course Outline & Introduction.ppt
Topic 1 - Microeconomics - Course Outline & Introduction.pptTopic 1 - Microeconomics - Course Outline & Introduction.ppt
Topic 1 - Microeconomics - Course Outline & Introduction.pptVineet918331
 
Chapter 1 Part 1.pptx
Chapter 1 Part 1.pptxChapter 1 Part 1.pptx
Chapter 1 Part 1.pptxzaki417475
 
Introduction to econ new 1
Introduction to econ new 1Introduction to econ new 1
Introduction to econ new 1Rashain Perera
 
principles.pptx
principles.pptxprinciples.pptx
principles.pptxredagad2
 
IntroductiontoEconomics.ppt
IntroductiontoEconomics.pptIntroductiontoEconomics.ppt
IntroductiontoEconomics.pptmohamame1
 
IntroductiontoEconomics.pptuuuyuiioooiuu
IntroductiontoEconomics.pptuuuyuiioooiuuIntroductiontoEconomics.pptuuuyuiioooiuu
IntroductiontoEconomics.pptuuuyuiioooiuuJihaneJihane10
 
81688ada-a751-47a8-be1e-aa3b4a3250d8.pptx
81688ada-a751-47a8-be1e-aa3b4a3250d8.pptx81688ada-a751-47a8-be1e-aa3b4a3250d8.pptx
81688ada-a751-47a8-be1e-aa3b4a3250d8.pptxMuhammedAli304726
 
2 what is economics
2 what is economics2 what is economics
2 what is economicsgannibhai
 
Urban economy literature study
Urban economy literature studyUrban economy literature study
Urban economy literature studyAditi Garg
 
Economic analysis for business decisions
Economic analysis for business decisionsEconomic analysis for business decisions
Economic analysis for business decisionsRevaMittal
 
Lecture1 Economic problem, Economic Agents, Types of economic analysis
Lecture1 Economic problem, Economic Agents, Types of economic analysisLecture1 Economic problem, Economic Agents, Types of economic analysis
Lecture1 Economic problem, Economic Agents, Types of economic analysissairamushtaq786
 
Applied economics introduction to economics abm specialized subject
Applied economics introduction to economics   abm specialized subjectApplied economics introduction to economics   abm specialized subject
Applied economics introduction to economics abm specialized subjectGian Paulo Rabanal, LPT
 

Similar to Nature and scope of economics (20)

2.nature and scope of economics pgp1
2.nature and scope of economics pgp12.nature and scope of economics pgp1
2.nature and scope of economics pgp1
 
Natureandscopeofeconomics 120505234644-phpapp02
Natureandscopeofeconomics 120505234644-phpapp02Natureandscopeofeconomics 120505234644-phpapp02
Natureandscopeofeconomics 120505234644-phpapp02
 
managerial economics Introduction.pptx
managerial economics  Introduction.pptxmanagerial economics  Introduction.pptx
managerial economics Introduction.pptx
 
Introduction of Microeconomics (2).pptx
Introduction of Microeconomics (2).pptxIntroduction of Microeconomics (2).pptx
Introduction of Microeconomics (2).pptx
 
Topic 1 - Microeconomics - Course Outline & Introduction.ppt
Topic 1 - Microeconomics - Course Outline & Introduction.pptTopic 1 - Microeconomics - Course Outline & Introduction.ppt
Topic 1 - Microeconomics - Course Outline & Introduction.ppt
 
2.nature and scope of economics pgp1
2.nature and scope of economics pgp12.nature and scope of economics pgp1
2.nature and scope of economics pgp1
 
Chapter 1 Part 1.pptx
Chapter 1 Part 1.pptxChapter 1 Part 1.pptx
Chapter 1 Part 1.pptx
 
Introduction to econ new 1
Introduction to econ new 1Introduction to econ new 1
Introduction to econ new 1
 
principles.pptx
principles.pptxprinciples.pptx
principles.pptx
 
IntroductiontoEconomics.ppt
IntroductiontoEconomics.pptIntroductiontoEconomics.ppt
IntroductiontoEconomics.ppt
 
IntroductiontoEconomics.pptuuuyuiioooiuu
IntroductiontoEconomics.pptuuuyuiioooiuuIntroductiontoEconomics.pptuuuyuiioooiuu
IntroductiontoEconomics.pptuuuyuiioooiuu
 
81688ada-a751-47a8-be1e-aa3b4a3250d8.pptx
81688ada-a751-47a8-be1e-aa3b4a3250d8.pptx81688ada-a751-47a8-be1e-aa3b4a3250d8.pptx
81688ada-a751-47a8-be1e-aa3b4a3250d8.pptx
 
Economics review
Economics reviewEconomics review
Economics review
 
2 what is economics
2 what is economics2 what is economics
2 what is economics
 
Urban economy literature study
Urban economy literature studyUrban economy literature study
Urban economy literature study
 
ECONOMICS Unit 1.1.pptx
ECONOMICS Unit 1.1.pptxECONOMICS Unit 1.1.pptx
ECONOMICS Unit 1.1.pptx
 
Economic analysis for business decisions
Economic analysis for business decisionsEconomic analysis for business decisions
Economic analysis for business decisions
 
slideshare.pptx
slideshare.pptxslideshare.pptx
slideshare.pptx
 
Lecture1 Economic problem, Economic Agents, Types of economic analysis
Lecture1 Economic problem, Economic Agents, Types of economic analysisLecture1 Economic problem, Economic Agents, Types of economic analysis
Lecture1 Economic problem, Economic Agents, Types of economic analysis
 
Applied economics introduction to economics abm specialized subject
Applied economics introduction to economics   abm specialized subjectApplied economics introduction to economics   abm specialized subject
Applied economics introduction to economics abm specialized subject
 

Recently uploaded

ICS2208 Lecture6 Notes for SL spaces.pdf
ICS2208 Lecture6 Notes for SL spaces.pdfICS2208 Lecture6 Notes for SL spaces.pdf
ICS2208 Lecture6 Notes for SL spaces.pdfVanessa Camilleri
 
Decoding the Tweet _ Practical Criticism in the Age of Hashtag.pptx
Decoding the Tweet _ Practical Criticism in the Age of Hashtag.pptxDecoding the Tweet _ Practical Criticism in the Age of Hashtag.pptx
Decoding the Tweet _ Practical Criticism in the Age of Hashtag.pptxDhatriParmar
 
Mythology Quiz-4th April 2024, Quiz Club NITW
Mythology Quiz-4th April 2024, Quiz Club NITWMythology Quiz-4th April 2024, Quiz Club NITW
Mythology Quiz-4th April 2024, Quiz Club NITWQuiz Club NITW
 
How to Make a Duplicate of Your Odoo 17 Database
How to Make a Duplicate of Your Odoo 17 DatabaseHow to Make a Duplicate of Your Odoo 17 Database
How to Make a Duplicate of Your Odoo 17 DatabaseCeline George
 
How to Fix XML SyntaxError in Odoo the 17
How to Fix XML SyntaxError in Odoo the 17How to Fix XML SyntaxError in Odoo the 17
How to Fix XML SyntaxError in Odoo the 17Celine George
 
4.16.24 21st Century Movements for Black Lives.pptx
4.16.24 21st Century Movements for Black Lives.pptx4.16.24 21st Century Movements for Black Lives.pptx
4.16.24 21st Century Movements for Black Lives.pptxmary850239
 
Reading and Writing Skills 11 quarter 4 melc 1
Reading and Writing Skills 11 quarter 4 melc 1Reading and Writing Skills 11 quarter 4 melc 1
Reading and Writing Skills 11 quarter 4 melc 1GloryAnnCastre1
 
Active Learning Strategies (in short ALS).pdf
Active Learning Strategies (in short ALS).pdfActive Learning Strategies (in short ALS).pdf
Active Learning Strategies (in short ALS).pdfPatidar M
 
Q-Factor HISPOL Quiz-6th April 2024, Quiz Club NITW
Q-Factor HISPOL Quiz-6th April 2024, Quiz Club NITWQ-Factor HISPOL Quiz-6th April 2024, Quiz Club NITW
Q-Factor HISPOL Quiz-6th April 2024, Quiz Club NITWQuiz Club NITW
 
Unraveling Hypertext_ Analyzing Postmodern Elements in Literature.pptx
Unraveling Hypertext_ Analyzing  Postmodern Elements in  Literature.pptxUnraveling Hypertext_ Analyzing  Postmodern Elements in  Literature.pptx
Unraveling Hypertext_ Analyzing Postmodern Elements in Literature.pptxDhatriParmar
 
4.9.24 School Desegregation in Boston.pptx
4.9.24 School Desegregation in Boston.pptx4.9.24 School Desegregation in Boston.pptx
4.9.24 School Desegregation in Boston.pptxmary850239
 
Tree View Decoration Attribute in the Odoo 17
Tree View Decoration Attribute in the Odoo 17Tree View Decoration Attribute in the Odoo 17
Tree View Decoration Attribute in the Odoo 17Celine George
 
DIFFERENT BASKETRY IN THE PHILIPPINES PPT.pptx
DIFFERENT BASKETRY IN THE PHILIPPINES PPT.pptxDIFFERENT BASKETRY IN THE PHILIPPINES PPT.pptx
DIFFERENT BASKETRY IN THE PHILIPPINES PPT.pptxMichelleTuguinay1
 
Daily Lesson Plan in Mathematics Quarter 4
Daily Lesson Plan in Mathematics Quarter 4Daily Lesson Plan in Mathematics Quarter 4
Daily Lesson Plan in Mathematics Quarter 4JOYLYNSAMANIEGO
 
How to Manage Buy 3 Get 1 Free in Odoo 17
How to Manage Buy 3 Get 1 Free in Odoo 17How to Manage Buy 3 Get 1 Free in Odoo 17
How to Manage Buy 3 Get 1 Free in Odoo 17Celine George
 
Oppenheimer Film Discussion for Philosophy and Film
Oppenheimer Film Discussion for Philosophy and FilmOppenheimer Film Discussion for Philosophy and Film
Oppenheimer Film Discussion for Philosophy and FilmStan Meyer
 
Q4-PPT-Music9_Lesson-1-Romantic-Opera.pptx
Q4-PPT-Music9_Lesson-1-Romantic-Opera.pptxQ4-PPT-Music9_Lesson-1-Romantic-Opera.pptx
Q4-PPT-Music9_Lesson-1-Romantic-Opera.pptxlancelewisportillo
 
MS4 level being good citizen -imperative- (1) (1).pdf
MS4 level   being good citizen -imperative- (1) (1).pdfMS4 level   being good citizen -imperative- (1) (1).pdf
MS4 level being good citizen -imperative- (1) (1).pdfMr Bounab Samir
 

Recently uploaded (20)

ICS2208 Lecture6 Notes for SL spaces.pdf
ICS2208 Lecture6 Notes for SL spaces.pdfICS2208 Lecture6 Notes for SL spaces.pdf
ICS2208 Lecture6 Notes for SL spaces.pdf
 
Decoding the Tweet _ Practical Criticism in the Age of Hashtag.pptx
Decoding the Tweet _ Practical Criticism in the Age of Hashtag.pptxDecoding the Tweet _ Practical Criticism in the Age of Hashtag.pptx
Decoding the Tweet _ Practical Criticism in the Age of Hashtag.pptx
 
Mythology Quiz-4th April 2024, Quiz Club NITW
Mythology Quiz-4th April 2024, Quiz Club NITWMythology Quiz-4th April 2024, Quiz Club NITW
Mythology Quiz-4th April 2024, Quiz Club NITW
 
How to Make a Duplicate of Your Odoo 17 Database
How to Make a Duplicate of Your Odoo 17 DatabaseHow to Make a Duplicate of Your Odoo 17 Database
How to Make a Duplicate of Your Odoo 17 Database
 
How to Fix XML SyntaxError in Odoo the 17
How to Fix XML SyntaxError in Odoo the 17How to Fix XML SyntaxError in Odoo the 17
How to Fix XML SyntaxError in Odoo the 17
 
prashanth updated resume 2024 for Teaching Profession
prashanth updated resume 2024 for Teaching Professionprashanth updated resume 2024 for Teaching Profession
prashanth updated resume 2024 for Teaching Profession
 
4.16.24 21st Century Movements for Black Lives.pptx
4.16.24 21st Century Movements for Black Lives.pptx4.16.24 21st Century Movements for Black Lives.pptx
4.16.24 21st Century Movements for Black Lives.pptx
 
Reading and Writing Skills 11 quarter 4 melc 1
Reading and Writing Skills 11 quarter 4 melc 1Reading and Writing Skills 11 quarter 4 melc 1
Reading and Writing Skills 11 quarter 4 melc 1
 
Faculty Profile prashantha K EEE dept Sri Sairam college of Engineering
Faculty Profile prashantha K EEE dept Sri Sairam college of EngineeringFaculty Profile prashantha K EEE dept Sri Sairam college of Engineering
Faculty Profile prashantha K EEE dept Sri Sairam college of Engineering
 
Active Learning Strategies (in short ALS).pdf
Active Learning Strategies (in short ALS).pdfActive Learning Strategies (in short ALS).pdf
Active Learning Strategies (in short ALS).pdf
 
Q-Factor HISPOL Quiz-6th April 2024, Quiz Club NITW
Q-Factor HISPOL Quiz-6th April 2024, Quiz Club NITWQ-Factor HISPOL Quiz-6th April 2024, Quiz Club NITW
Q-Factor HISPOL Quiz-6th April 2024, Quiz Club NITW
 
Unraveling Hypertext_ Analyzing Postmodern Elements in Literature.pptx
Unraveling Hypertext_ Analyzing  Postmodern Elements in  Literature.pptxUnraveling Hypertext_ Analyzing  Postmodern Elements in  Literature.pptx
Unraveling Hypertext_ Analyzing Postmodern Elements in Literature.pptx
 
4.9.24 School Desegregation in Boston.pptx
4.9.24 School Desegregation in Boston.pptx4.9.24 School Desegregation in Boston.pptx
4.9.24 School Desegregation in Boston.pptx
 
Tree View Decoration Attribute in the Odoo 17
Tree View Decoration Attribute in the Odoo 17Tree View Decoration Attribute in the Odoo 17
Tree View Decoration Attribute in the Odoo 17
 
DIFFERENT BASKETRY IN THE PHILIPPINES PPT.pptx
DIFFERENT BASKETRY IN THE PHILIPPINES PPT.pptxDIFFERENT BASKETRY IN THE PHILIPPINES PPT.pptx
DIFFERENT BASKETRY IN THE PHILIPPINES PPT.pptx
 
Daily Lesson Plan in Mathematics Quarter 4
Daily Lesson Plan in Mathematics Quarter 4Daily Lesson Plan in Mathematics Quarter 4
Daily Lesson Plan in Mathematics Quarter 4
 
How to Manage Buy 3 Get 1 Free in Odoo 17
How to Manage Buy 3 Get 1 Free in Odoo 17How to Manage Buy 3 Get 1 Free in Odoo 17
How to Manage Buy 3 Get 1 Free in Odoo 17
 
Oppenheimer Film Discussion for Philosophy and Film
Oppenheimer Film Discussion for Philosophy and FilmOppenheimer Film Discussion for Philosophy and Film
Oppenheimer Film Discussion for Philosophy and Film
 
Q4-PPT-Music9_Lesson-1-Romantic-Opera.pptx
Q4-PPT-Music9_Lesson-1-Romantic-Opera.pptxQ4-PPT-Music9_Lesson-1-Romantic-Opera.pptx
Q4-PPT-Music9_Lesson-1-Romantic-Opera.pptx
 
MS4 level being good citizen -imperative- (1) (1).pdf
MS4 level   being good citizen -imperative- (1) (1).pdfMS4 level   being good citizen -imperative- (1) (1).pdf
MS4 level being good citizen -imperative- (1) (1).pdf
 

Nature and scope of economics

  • 2. Introduction • The word Economics is derived from the Greek word ―OKIOS NEMEIN‖ meaning household management • Man is a bundle of desires. Goods and services satisfy these wants. But almost all the goods are scares • To produce goods factors of production are needed and these are all scarce 5/5/2012 Arihant Jain P.G.D.M. 2
  • 3. The Study of Economics • Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. • It is the study of economic problems. Wants are motive for economic activity. Wants leads to efforts and which lead to satisfaction 5/5/2012 Arihant Jain P.G.D.M. 3
  • 4. Why Study Economics? • To learn a way of thinking • Three fundamental concepts: – Opportunity cost – Marginalism, and – Efficient markets 5/5/2012 Arihant Jain P.G.D.M. 4
  • 5. Contd… Opportunity Cost • the best alternative that we forgo, or give up, when we make a choice or a decision • arises because time and resources are scarce. Marginalism • In weighing the costs and benefits of a decision, it is important to weigh only the costs and benefits that arise from the decision Efficient Market • is one in which profit opportunities are eliminated almost instantaneously • Profit opportunities are rare because, at any one time, there are many people searching for them 5/5/2012 Arihant Jain P.G.D.M. 5
  • 6. Economic Definitions • Adam Smith gave the Wealth Definition • Alfred Marshall gave the Welfare Definition • Lionel Ribbons gave the Scarcity Definition • Paul Samuelson gave the Growth Definition 5/5/2012 Arihant Jain P.G.D.M. 6
  • 7. Wealth Definition • Adam Smith (Father of Economics) in his book ―Wealth of nations 1776‖ defined economics is the study of wealth • J.B. Jay, J.S. Mill, Walker, B Price all agreed with Adam Smith • In this definition wealth is given the first place and man is given the second place 5/5/2012 Arihant Jain P.G.D.M. 7
  • 8. Meaning of wealth • Around the industrial revolution, merchants were the most powerful class in Western Europe, and wealth for them meant money only. Since money at that time was in the shape of gold, merchants declared gold as the only wealth, • This definition rendered merchants as the only productive class, as they created it by trade, • This definition harmed the interests of newly emerging class of petty industrialists and their hard working workers, • Adam Smith as spokesman of the emerging class widened the definition to include all material goods, • Activities which did not result in material goods production were unproductive. 5/5/2012 Arihant Jain P.G.D.M. 8
  • 9. Causes of wealth of nations: Capitalism • Traders were not the only cause of wealth, • Freedom of trade and enterprise were the greatest causes of wealth because: i) Human beings are born selfish ii) They have self interest, iii) It is not the benevolence but self interest which guides economic activity iv) So left to themselves, each individual would maximise his self interest (income/wealth), v) When all the adult citizens of a nation maximise their self interest, the wealth of nation would grow the fastest, vi) So why should the mercantilists or anybody else impose restriction on the freedom of individuals, 5/5/2012 Arihant Jain P.G.D.M. 9
  • 10. Exceptions (Criticism) • While an invisible hand guides societies which rely on self interest, there are certain exceptions where it does not work. These are: • Defense • Public utilities • Law order and justice 5/5/2012 Arihant Jain P.G.D.M. 10
  • 11. Science of welfare • Adam Smith’s prophesy that self interest would be beneficial to all did not materialise after the industrial revolution, • The revolution divided the society between haves and have-nots, including unemployd • Criticism turned reformist and revolutionary, • Marshall attempted to offer a compromise and a new definition: ― Political economy or economics is the study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well-being‖. ― The range of our enquiry becomes restricted to that part of social welfare which can be brought directly or indirectly into relashhionship with measuring rod of money‖, Pigou. 5/5/2012 Arihant Jain P.G.D.M. 11
  • 12. Criticism of welfare definition • Economics is not restricted to material things, non material things like health and education, entertainment are also important, • Welfare is subjective and varies from person to person, • It is difficult to segregate material welfare from other types of welfare, • The concept of welfare is not fixed but subject to change and interpretation, • It differs from time to time, country to country 5/5/2012 Arihant Jain P.G.D.M. 12
  • 13. Science of scarcity • According to Lionel Ribbons Economics is ―the science which studies human behavior as a relationship between ends and scarce means which have alternative uses‖. So all goods and services commanding a price fall under the scope of economics. • Unlimited human wants: Necessities, comforts and luxuries’ • Necessities: a) Necessities of existence b) Necessities of efficiency, and c) Necessities of convention. 5/5/2012 Arihant Jain P.G.D.M. 13
  • 14. Contd… • Comforts and luxuries are : • A) Related to time, place • B) No watertight compartmentalization as a luxury may be comfort or even a necessity for someone or at different periods of history. • Criticism; • It fails to explain why labour despite being scarce remains unemployed / underemployed • It also fails to explain situations of abundance • Is neutral to ends • Ignores welfare 5/5/2012 Arihant Jain P.G.D.M. 14
  • 15. Science of growth and development • ―Economics is the study of how men and society chose, with or without the use of money, to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in future amongst various people and groups of society‖ 5/5/2012 Arihant Jain P.G.D.M. 15
  • 16. The Scope of Economics • Microeconomics is the branch of economics that examines the functioning of individual industries and the behavior of individual decision- making units—that is, business firms and households. • Macroeconomics is the branch of economics that examines the economic behavior of aggregates— income, output, employment, and so on—on a national scale 5/5/2012 Arihant Jain P.G.D.M. 16
  • 17. The Diverse Fields of Economics Examples of microeconomic and macroeconomic concerns Production Prices Income Employment Microeconomics Production/Output Price of Individual Distribution of Employment by in Individual Goods and Services Income and Wealth Individual Industries and Businesses & Businesses Price of medical Wages in the auto Industries care industry Jobs in the steel How much steel Price of gasoline Minimum wages industry How many offices Food prices Executive salaries Number of How many cars Apartment rents Poverty employees in a firm Macroeconomics National Aggregate Price National Income Employment and Production/Output Level Total wages and Unemployment in salaries the Economy Total Industrial Consumer prices Output Producer Prices Total corporate Total number of Gross Domestic Rate of Inflation profits jobs Product Unemployment Growth of Output rate 5/5/2012 Arihant Jain P.G.D.M. 17
  • 18. The Method of Economics • Positive economics studies economic behavior without making judgments. It describes what exists and how it works. • Normative economics, also called policy economics, analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action. 5/5/2012 Arihant Jain P.G.D.M. 18
  • 19. Contd… • Positive economics includes: – Descriptive economics, which involves the compilation of data that describe phenomena and facts. – Economic theory, which involves building models of behavior. • An economic theory is a general statement of cause and effect, action and reaction 5/5/2012 Arihant Jain P.G.D.M. 19
  • 20. Contd… • Empirical economics refers to the collection and use of data to test economic theories. • Many data sets are available to facilitate economic research. They are collected by both government agencies and private companies, 5/5/2012 Arihant Jain P.G.D.M. 20
  • 21. Criteria for judging economic outcomes • Economic growth, or an increase in the total output of an economy. • Economic stability, or the condition in which output is steady or growing, with low inflation and full employment of resources. • Efficiency, or allocative efficiency. An efficient economy is one that produces what people want at the least possible cost • Equity, or fairness of economic outcomes 5/5/2012 Arihant Jain P.G.D.M. 21
  • 22. Economic System • The manner or the structure through which the economy of a country operates is known as Economic System • Variety of Economic Systems • They differ from each other not only in details but also in broader outlines • Types of Economic Systems: – Capitalist – Socialist and – Mixed Economy 5/5/2012 Arihant Jain P.G.D.M. 22
  • 23. Capitalism • All economic activities are guided by market forces • Policy of laiseez-faire (absence of state intervention). Privately owned resources • What to Produce, how to produce and for whom to produce power rests with the producers • Profit maximization is the main aim 5/5/2012 Arihant Jain P.G.D.M. 23
  • 24. Merits and Demerits Capitalism Merits Demerits Fast Hides Self impleme- real High rate of Inequalities ntation of need of obsolescence regulatory in income efficient the and wealth decisions society 5/5/2012 Arihant Jain P.G.D.M. 24
  • 25. Socialism • Originated due to drawbacks of capitalism • Just opposite to capitalism • The merits of capitalism become the demerits and merits thus become the demerits • It aims at removing the inequalities of income and wealth, inequalities of economic opportunities, unemployment and waste of productive resources 5/5/2012 Arihant Jain P.G.D.M. 25
  • 26. Mixed Economy • Merits of capitalism and Socialism are taken and a Mixed economy is formed • Generally adopted by countries with low per capita income and is underdeveloped or is developing (India) • Some sectors are kept in Government control 5/5/2012 Arihant Jain P.G.D.M. 26
  • 27. 5/5/2012 Arihant Jain P.G.D.M. 27