PREPARING FOR NET EXAM COMMERCE

1. Unit 3
Business Economics
NKP Academy: NTA NET Paper-2 Economics
Class1Time: Mar 27, 2022 08:30 PM
Dr. A. Jagan Gopu., M.A., Ph.D., NET-JRF., SET.,
Assistant Professor
Department of Economics
Guru Nanak College (Autonomous) Chennai

2. UNIT – III Business Economics
Meaning and scope of business economics
Objectives of business firms
Demand analysis: Law of demand; Elasticity of demand and its
measurement; Relationship between AR and MR
Consumer behavior: Utility analysis; Indifference curve analysis
Law of Variable Proportions: Law of Returns to Scale
Theory of cost: Short-run and long-run cost curves
Price determination under different market forms: Perfect competition;
Monopolistic competition; Oligopoly- Price leadership model; Monopoly;
Price discrimination
Pricing strategies: Price skimming; Price penetration; Peak load pricing

3. Four definitions in Economics
• 01. Smith’s Wealth Definition, representing the Classical era;
• 02. Marshall’s Welfare Definition, representing the Neo-Classical era;
• 03. Robbins’Scarcity Definition, representing the New Age; and,
• 04. Samuelson’s Growth Definition, representing the Modern Age.

4. First Adam Smith’s Wealth Definition
• Adam Smith (1723- 1790)
• in his book “An Inquiry into Nature and Causes of Wealth of Nations”
(1776) defines “Economics as the science of wealth”.
• He explains how a nation’s wealth is created and increased.
• He considers that the individual in the society wants to promote his own
gain and in this process, he is guided and led by an“invisible hand”.
• The publication of Adam Smith’s “The Wealth of Nations” in 1776, has
• been described as “the effective birth of economics as a separate discipline”.
• Considered his as a father of Economics

5. Second Marshalls Welfare Definition
• Alfred Marshall (1842-1924) in his book “Principles of
Economics” (1890)
• defines Economics thus: “Political Economy” or Economics is a 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. us,
it is on one side a study of wealth; and on the other, and more
important side, a part of the study of man.”

6. Third Lionel Robbins Scarcity Definition
• Lionel Robbins (1898-1984) published a book “An Essay on the
Nature and Significance of Economic Science” in 1932.
• According to him, “Economics is a science which studies human
behavior as a relationship between ends and scarce means which have
alternative uses”.

7. Fourth - Paul Samuelson Growth Definition
• Paul Samuelson (1915-2009) “an Introductory evaluation” in 1948 it
defines Economics as “the study of how men and society choose, 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 the future
among various people and groups of society”.
• 1970 he received noble prize for his contribution in economics

10. Subject Matter of Economics
• Production
• Distribution
• Exchange
• Consumption

11. Economic Problems
• The unlimited wants
• The resources to satisfy wants are limited
• The resources have alternative uses
• The choice between wants

12. Tools of Economic Analysis

13. Normative vs Positive

14. Mathematics in Economics
• It used as a tool of economic analysis
• It was found great favor among economists
• Geometry an important tool of economic analysis
• Application of Calculus used to study marginal analysis (through
differentiate and integration)

15. Basic Assumption of Economics
• Rationality: (consumer or producer / household or a firm is assumed to
behave in a rational manner and go in for maximum gain)
• Rationality and concept of Equilibrium: (Equilibrium stands for a
position of rest, a position of no change. For consumer spends his
limited income to the basket of the goods and secures maximum
satisfaction and producer given technology and resources produced
maximum output at minimum cost)
• Capitalist Economy: (Market forces)
• Ceteris Paribus: other things being equal

16. Micro & Macro Economic Analysis
• Partial vs General Equilibrium
• Micro deals with individuals
• Macro deals with aggregate

18. Previous Year Questions
Q1
Q2.
Q3.
Q8.
Q9.
A U‐ shaped long‐run average cost curve is based on the assumptions that
A. Economies of scale prevails at small levels of output
B. Diseconomies of scale prevails at larger levels of output
C. Benefits of the division of labour and specialisation accrue more at the lower scale of production
D. Managerial inefficiencies are prone to a higher scale of operations
Q10.

19. Q.11
Q.12
Q.13
Q.14

20. Q.15
Q.16

21. Q.17
Q.18

22. Q12.
Q19.

23. Q20.
Q21