Basics of Economics

1. Economics:-Definitions
• Economics is a study of human activity both at
individual and national level. Any activity
involved in efforts aimed at earning money
and spending this money to satisfy our wants
such as food, Clothing, shelter, and others are
called “Economic activities”.

2. Economics:-Definitions
• Dr. Alfred Marshall, one of the greatest
economists of the nineteenth century, writes
“Economics is a study of man’s actions in the
ordinary business of life: it enquires how he
gets his income and how he uses it”

3. Economics:- As a Science and as an Art
• According to Cossa:-
• Science:- teaches us to know
• Art:- teaches us to do
• Science:- Based on facts(Systematically
collected, classified and analysed)
• Economics(Science):- Uses Scientific methods
in its researches and investigations

4. Economics:- As a Science and as an Art
• Science:- Phenomena should be easily
amenable to measurement.
• Forecast/Predictions

5. Economics:- As a Science and as an Art
• Art:- A systematic body of knowledge but, it
lays down precepts or specific solution for
specific problem.
• Art:- System of rules for attainment of given
end.
• More practical than science.
• Economics:- Several branches of economics
which offer practical guidance in the solution
of economic problems.

6. Business Economics, also called Managerial
Economics, is the application of economic
theory and methodology to business.
Business involves decision-making.

7. Economics :-Classification
• Broad Classification:- Micro and Macro
Economics

8. Microeconomics
➢ The study of an individual consumer or a firm is called microeconomics.
➢ Microeconomics deals with behaviour and problems of single individual
and of micro organization.
➢ It is concerned with the application of the concepts such as price theory,
Law of Demand and theories of market structure and so on.

9. Macroeconomics:
➢ The study of ‘aggregate’ or total level of economic activity in a country is called
macroeconomics.
➢ It studies the flow of economics resources or factors of production (such as land, labor,
capital, organization and technology) from the resource owner to the business firms and
then from the business firms to the households.
➢ It is concerned with the level of employment in the economy.
➢ It discusses aggregate consumption, aggregate investment, price level, and payment,
theories of employment, and so on

10. Basic Problems of an economy
• What to produce
• How to produce
• For whom to produce
• What provision (if any) be made for economic
growth.

11. Economic Systems
• Market Economy
• Command Economy
• Mixed Economy

12. How basic problems are solved
• Price or Market Mechanism
• Economic Planning

13. Nature of Business/managerial
Economics
• Close to microeconomics
• Operates against the backdrop of
macroeconomics
• Normative statements
• Prescriptive actions
• Applied in nature
• Offers scope to evaluate each alternative
• Interdisciplinary

14. Scope of Business Economics
a. The selection of product or service to be
produced.
b. The choice of production methods and
resource combinations.
c. The determination of the best price and
quantity combination
d. Promotional strategy and activities.
e. The selection of the location from which to
produce and sell goods or service to consume