1) The document discusses the definitions and scope of both microeconomics and macroeconomics. Microeconomics examines the economic decisions of individual agents like consumers and firms, while macroeconomics analyzes aggregates for the overall economy such as total output, employment and inflation. 2) Microeconomics determines demand and supply patterns and helps explain pricing and resource allocation. However, it does not address issues like national income determination, business cycles, unemployment, and the effects of fiscal and monetary policy. 3) Macroeconomics is concerned with economy-wide magnitudes rather than individual units. It studies important macro issues such as income, employment, price levels, business cycles, balance of payments, and the impact of government policies

1. 6th Semester
Masterji college of architecture

2. Any discussion on a subject must start by
explaining what the subject is all about i.e., by
defining the subject.
The principal fact about Economics that we must
always remember is that it is a social science. If
we forget this, we tend to get bogged down with
questions that are not relevant to Economics and
are best left to other disciplines.
The word ‘Economics’ originates from the
Greek work ‘Oikonomikos’ which can be divided
into two parts:
(a) ‘Oikos’, which means ‘Home’, and
(b) ‘Nomos’, which means ‘Management’.

3. ECONOMICS
What is Economics?
Economics is a dynamic science. With the
development of human civilization this science has
evolved to include within its ambit a vast range of
topics concerned with human life. Every society on
this earth faces three basic facts of human life
one, human wants are unlimited two, resources to
satisfy these wants are limited and three,
resources have alternative uses. Under such a
situation a society cannot provide all its members
every thing they want.

5. Thus, Economics means the study of the way in
which mankind organizes itself to tackle the basic
problems of scarcity. All societies have more wants
than resources. Hence, a system must be devised
to allocate these resources between competing
ends.
The society has to make a choice of wants to be
satisfied in order of priority. Making such a choice is
a highly difficult task. Here the science of economics
comes to our rescue. Economics teaches us the ways
and means to allocate scarce resources among
different competing human wants so as to maximize
the total satisfaction of our society.

6. We have now formed an idea about the meaning
of Economics. This at once leads to a general
definition of Economics. Economics is the social
science that studies economic activities.
This definition is, however, too broad. It does not
specify the exact manner in which the economic
activities are to be studied. Economic activities
essentially mean production, exchange and
consumption of goods and services.

7. Thus, Economics means ‘Home Management’.
The head of a family faces the problem of
managing the unlimited wants of the family
members within the limited income of the
family. In fact, the same is true for a society
also. If we consider the whole society as a
‘family’, then the society also faces the problem
of tackling unlimited wants of the members of
the society with the limited resources available
in that society.

9. These definitions can be classified into four
groups:
1. Wealth definitions,
2. Material welfare definitions,
3. Scarcity definitions, and
4. Growth-centered definitions.

10. Features of Material Welfare Definitions
The main features of material welfare-centered
definitions are as follows:
1. Study of material requisites of well-being:
These definitions indicate that economics studies
only the material aspects of well-being. Thus,
these definitions emphasize the materialistic
aspects of economic welfare.
2. Concentrates on the ordinary business of life:
These definitions show that Economics deals
with the study of man in the ordinary business of
life. Thus, Economics enquires how an individual
gets his income and how he uses it.

11. 3. A stress on the role of man: These definitions
stress on the role of man in the creation of
wealth or income.

12. Why study economics?
The purpose of studying economics is not to acquire
a set of ready-made answers to economic questions,
but to learn how to avoid being deceived by
economists

13. The study of economics helps us to understand the
world in which we live. There are many questions
about the economy which spark off our mind and we
want some concrete answers to these questions.
•Why do the prices of some commodities rise faster
than others?
•Why some people are able to find work and others
are unemployed?
•Why is there inequality of income and wealth in an
economy?
•Why some economies are rich and advanced while
others are poor and backward?
•Why can’t or why don’t government keep prices
stable over time?
The study of economics helps us to understand these
and many other problems/questions that we face in
our

15. For an individual person and the household the
knowledge of economics helps to make decision
regarding the choice of what particular profession /
job, to take up?
How to maximize income, how much and where to
spend, save and invest?
It is important for employees as well as employers
to know about productivity and wages in their
organization as well as in the whole economy. It is
very helpful in maintaining cordial employer-
employee relationships and overall industrial peace
& progress.

16. Main Features of Scarcity Definition
The principal features of scarcity definitions are as
follows:
1. Human wants are unlimited: The scarcity
definition in Economics states that human wants
are unlimited. If one’s wants are satisfied, another
want crops up. Thus, different wants appear one
after another.
2. Limited means to satisfy human wants: Though
wants are unlimited, yet the means for satisfying
these wants are limited. The resources needed to
satisfy these wants are limited. For example, the
money income (per month) required for the
satisfaction of wants of an individual is limited. Any
resource is considered as scarce if its supply is less
than its demand.

17. Further, economics is an important
branch of knowledge for improving the
welfare of society. It provides us
important tools not only for the best
utilization of available limited resources
but also the ways and means to augment
these resources. Thus the study of
economics and its understanding appears
to be quite significant for economic
development, political stability and
social harmony in an economy.

19. The credit for bringing order into the chaotic state
of economic enquiry goes to Adam Smith and David
Ricardo. “To this order the name of the classical
system has been given. Different schools of thought
among later economist have chosen this name for
different reasons. Sometimes the term ‘classical’ is
applied to the doctrines of the system in order to
describe the unquestioned and widespread
authority which they possessed. Sometimes it is
used to add a special significance to the
consequences in the realm of policy which flowed
from these doctrines.”
The Classical System

20. The classical system has mainly dealt with the
working of the capitalist system, together with
the historical development e.g. the industrial
revolution and the rise of industrial capitalism
which produced it. “It is not easy to define the
chronological limits of the classical system. Some
economists claim that the classical system never
ended and its tradition has lived on through the
work of the leaders of modern economics.”
The classical economists believed in the existence of an
economy which is working automatically under perfectly
competitive conditions and that there is no government
interference in the day to day working of the economy. The
economic system works through the forces of demand and
supply which is called the price mechanism.

21. Marginalist School
“Classicism, it was said, emphasized production,
supply and cost; modern theory is mainly
concerned with consumption, demand and utility.
The Marginal utility concept was introduced to
affect this shift of emphasis and has since
dominated academic thought with unchallenged
authority.”

22. According to Smith it is the scarcity of natural
resources that finally stops growth and leads
the economy to the stationary state. Malthus
along with Ricardo and Mill, sees growing
population and declining food supply and
capital accumulation through the operation of
law of diminishing returns, as the ultimate
checks to economic development.
The law of diminishing returns refers to a stage
in production where total output of a commodity
increases at a diminishing rate when quantity of
a variable input is increased by an additional unit.

23. Neoclassical economics
In the last quarter of the 19th c. the addition of so
called marginal analysis by Austrian, British and
American economists led eventually to the
substitution of the term neoclassical for classical
economics. (J.K. Galbraith 1974:11) The essence of
the neoclassical system is that individuals using their
income derived mainly from their own productive
activities express their desires by the way they
distribute their income for the various goods and
services available to them in the markets.

24. Features of the Modern Growth-Oriented
Definition
1. Growth-orientation: Economic growth is
measured by the change in national output over
time. The definition says that, Economics is
concerned with determining the pattern of
employment of scarce resources to produce
commodities ‘over time’. Thus, the dynamic
problems of production have been brought
within the purview of Economics.

25. 3. Alternative uses of scarce resources: Same
resource can be devoted to alternative lines of
production. Thus, same resource can be used for
the satisfaction of different types of human
wants. For example, a piece of land can be used
for either cultivation, or building a dwelling place
or building a factory shed, etc.
4. Efficient use of scarce resources: Since wants
are unlimited, so these wants are to be ranked in
order of priorities. On the basis of such priorities,
the scarce resources are to be used in an efficient
manner for the satisfaction of these wants.

26. 5. Need for choice and optimization: Since
human wants are unlimited, so one has to
choose between the most urgent and less urgent
wants. Hence, Economics is also called a science
of choice. So, scarce resources are to be used
for the maximum satisfaction (i.e.,
optimization) of the most urgent human want.

28. BRANCHES OF ECONOMICS:
NATURE OF ECONOMIC SCIENCE
Economic theory, as it stands today, has several
branches. Of these, two are most important.
These are microeconomics and macroeconomics.
We shall now briefly mention the major features
of these two branches to have an idea regarding
the nature of economics.

29. Microeconomics
Microeconomics is that branch of economics which
is concerned with the decision-making of a single
unit of an economic system. How does an
individual (or a family) decide on how much of
various commodities and services to consume?
How does a business firm decide how much of its
product (or products) to produce? These are the
typical questions discussed in microeconomics.
Determination of income, employment, etc. in the
economic system as a whole is not the concern of
microeconomics. Thus, microeconomics can be
defined as the study of economic decision-making
by micro-units.

30. Usefulness of Microeconomics
1. Determination of demand pattern: The study of
microeconomics has several uses. It determines the
pattern of demand in the economy, i.e., the
amounts of the demand for the different goods and
services in the economy, because the total demand
for a good or service is the sum total of the
demands of all the individuals. Thus, by
determining the demand patterns
of every individual or family, microeconomics
determines the demand pattern in the country as a
whole.

31. 2. Determination of the pattern of supply: In a
similar way, the pattern of supply in the country as
a whole, can be obtained from the amounts of
goods and services produced by the firms in the
economy. Microeconomics, therefore, determines
the pattern of supply as well.
3. Pricing: Probably the most important economic
question is the one of price determination. The
prices of the various goods and services determine
the pattern of resource allocation in the economy.
The prices, in turn, are determined by the
interaction of the forces of demand and supply of
the goods and services. By determining demand
and supply, microeconomics helps us in
understanding the process of price determination
and, hence, the process of determination of

32. 4. Policies for improvement of resource allocation:
As is well-known, economic development stresses
the need for improving the pattern of resource
allocation in the country. Development polices,
therefore, can be formulated only if we
understand how the pattern of
resource allocation is determined. For instance,
if we want to analyze how a tax or a subsidy will
affect the use of the scarce resources in the
economy, we have to know how these will affect
their prices. By explaining prices and, hence, the
pattern of resource allocation,
microeconomics helps us to formulate appropriate
development policies for an underdeveloped
economy.

33. 5. Solution to the problems of micro-units: Finally,
it goes without saying that, since the study of
microeconomics starts with the individual
consumers and producers, policies for the
correction of any wrong decisions at the micro-
level are also facilitated by microeconomics. For
example, if a firm has to know exactly what it
should do in order to run efficiently, it has to
know the optimal quantities of outputs produced
and of inputs purchased. Only then can any
deviation from these optimal levels be corrected.
In this sense, microeconomics helps the
formulation of policies at the micro-level.

34. In every society, the economic problems faced by
different economic agents (such as individual
consumers, producers, etc.) can be analyzed
with the help of microeconomic theories. This
shows that economics is a social science which
aims at analyzing the economic behavior of
individuals in a social environment.

35. Limitations of Microeconomics
However, microeconomics has its limitations as
well:
1. Monetary and fiscal policies: Although total
demand and total supply in the economy is the
sum of individual demands and individual supplies
respectively, the total economic picture of the
country cannot always be understood in this
simplistic way. There are many factors affecting
the total economic system, which are outside the
scope of microeconomics. For example, the role
of monetary and fiscal policies in the
determination of the economic variables cannot
be analyzed completely without going beyond
microeconomics

36. 2. Income determination: Microeconomics also does
not tell us anything about how the income of a
country (i.e., national income) is determined.
3. Business cycles: A related point is that, it does
not analyze the causes of fluctuations in national
income. The ups-and-downs of national income
over time are known as business cycles.
Microeconomics does not help us in understanding
as to why these cycles occur and what the
remedies are.

37. 4. Unemployment: One of the main economic
problems faced by an economy like India is the
problem of unemployment. This, again, is one of
the areas on which microeconomics does not shed
much light. Because, if we are to find a solution
to the unemployment problem, we must first
understand the causes of this problem. For that,
in turn, we must understand how the total
employment level in the economy is determined.
This is difficult to understand from within the
confines of microeconomics.

38. Macroeconomics
Macroeconomics is that branch of economics
which is concerned with the economic magnitudes
relating to the economic system as a whole, rather
than to the microeconomic units like individuals
or firms. It has, therefore, been called
‘aggregative economics’. In the picturesque
language of Kenneth Boulding, “Macroeconomics
deals ... not with individual income but with
national income, not with individual prices but
with the national price level, not with individual
outputs but with national output”

39. Importance of Macroeconomics
Why is the study of macroeconomics important? To
put it briefly, macroeconomics deals with some of
the questions untouched by microeconomics. The
study of economics is, therefore, left incomplete,
if we do not study macroeconomics. Some of the
important issues analyzed in macroeconomics are
the following:
1. Income and employment determination: The
determination of national income and of total
employment in the country are vital concerns of
macroeconomics. Since the volume of unemployment
is simply population minus the number of people
employed, unemployment is determined as soon as
the employment level is known.

40. 2. Price level: The determination of the general
price level is discussed in macroeconomic theories.
Upward movement of the general price level is
known as inflation. Thus, if we want to understand
the process of inflation and find ways of controlling
it, we must resort to the study of macroeconomics.

41. 3. Business cycles: The economic booms and depressions
in the levels of income and employment follow one
another in a cyclical fashion. While income rises and
employment expands during boom periods, they shrink
during depressions. Since depressions bring business
failures and unemployment in their wake, economists
have sought remedies to depressions. Discussion of
business cycles in general and anti-depression policies in
particular, fall within the scope of macroeconomics

42. 4. Balance of payments: The balance of payments
theory is also a part of macroeconomics. The
difference between the total inflow and the total
outflow of foreign exchange is known as the
balance of payments of a country. When this
balance is negative (i.e., outflow exceeds inflow),
the country faces a lot of economic hardships.
The causes and remedies of such balance of
payments problems are discussed in
macroeconomics.

43. 5. Government policies: The effects of various
government policies on the economic variables
like national income or the general price level
are also studied in macroeconomics.
[It should be noted that, we are talking of the
macroeconomic effects of government policies.
The effects of these policies on the micro-units
(for instance, the effects of taxes on the output
of an individual firm), are the subject-matter of
microeconomics.] Since, the Government occupies
an important position in any modern economic
system, the analysis of these effects is of obvious
importance

44. 6. Interrelations between markets: Probably, the
most important contribution of macroeconomic
theories is to show that different markets of the
economic system (for example, the commodity
market, the labor market, the bond market, the
money market, etc.) are interrelated. Any
disturbance in one of these markets affects all the
others. (Again, it should be noted that, it is the
interrelation between the macroeconomic markets
that we are talking about here.

45. BROAD SCOPE OF ECONOMICS
The scope of economics entails the identification
of basic economic problems before any society
and find out different possible ways to solve those
problems.
Economic Problem: The main economic problems
faced by every society are:
1. Unlimited human wants,
2. Limited availability of resources to satisfy
those wants,
3. Fulfillment of unlimited wants with limited
resources.

46. Different Branches of Economics
In any society, human wants are unlimited. If
one want is satisfied, the other appears soon.
For instance, if the basic needs of human
being (e.g., food, clothing and shelter) are
satisfied then some secondary needs appear
very soon. These secondary needs may be
social needs.

47. MICROECONOMICS
Individual decision-making and smaller components of
the economy Individual income Individual
consumption, Individual savings, Individual investment
Output of an individual firm, Individual expenditure
Price of any product/factor Demand/supply of any
product or a factor
Employment/unemployment in any industry
Export or import of a given product/factor, Output of
an industry

48. MACROECONOMICS
Decision-making at the, national level and
aggregate, economic variables, National income
Aggregate consumption, National savings,
Aggregate investment, National output, General
price-level, Inflation and deflation, Aggregate
employment or unemployment Aggregate exports
and imports of a country.

49. The Economic Benefits of
Sustainable Design
Evidence is growing that sustainable buildings
provide financial rewards for building owners,
operators, and occupants. Sustainable buildings
typically have lower annual costs for energy, water,
maintenance/repair, churn (reconfiguring space
because of changing needs), and other operating
expenses. These reduced costs do not have to come
at the expense of higher first costs.

50. Through integrated design and innovative
use of sustainable materials and equipment,
the first cost of a sustainable building can be
the same as, or lower than, that of a
traditional building. Some sustainable design
features have higher first costs, but the
payback period for the incremental
investment often is short and the lifecycle
cost typically lower than the cost of more
traditional buildings.

51. In addition to direct cost savings, sustainable
buildings can provide indirect economic benefits
to both the building owner and society. For
instance, sustainable building features can
promote better health, comfort, well-being, and
productivity of building occupants, which can
reduce levels of absenteeism and increase
productivity.

52. Sustainable building features can offer owners
economic benefits from lower risks, longer building
lifetimes, improved ability to attract new
employees, reduced expenses for dealing with
complaints, less time and lower costs for project
permitting resulting from community acceptance
and support for sustainable projects, and increased
asset value.

53. Sustainable buildings also offer society as a whole economic
benefits such as reduced costs from air pollution damage
and lower infrastructure costs, e.g., for avoided landfills,
wastewater treatment plants, power plants, and
transmission/distribution lines.

54. We know that using integrated design and
various low-cost sustainable features
reduces first costs. discuss the other direct
economic benefits: annual operating cost
savings for energy, water, maintenance and
repair, and churn discussion on the indirect
benefits of sustainable buildings for building
owners, and also discusses the indirect
benefits of sustainable buildings for society.
Case studies and research summaries
illustrating various benefits are included in
each section.

55. Sustainable design must begin at the conceptual
stage of a project to realize the full benefits. The
first step is to form a design team – including the
owners; architects; engineers; sustainable
design consultants; landscape designers; O&M
staff; health, safety and security experts; the
general contractor and key subcontractors; cost
consultants and value engineers; and occupant
representatives. This team
needs to work together from the start, seeking an
"integrated" design. The team develops
innovative solutions that meet energy,
environmental, and social goals while keeping
costs within budget.

56. Using their collective, interdisciplinary analytical
capability, the team can incorporate many strategies
that, taken alone, would increase first costs. For
example, by improving the building envelope, the
design team can often eliminate the heating,
ventilation, and air conditioning (HVAC) system
around the perimeter of the building (and the
associated ducting) and also downsize the primary
HVAC system. Downsizing the HVAC system and
eliminating ducting release money to pay for the
envelope improvements.

57. In a sustainable design project, the design
team conducts a tradeoff exercise – trading off
the cost of optional features against the cost
of features that will result in energy,
environmental, or social improvements.
Focusing on integrated solutions and explicitly
evaluating tradeoffs can result in a sustainable
facility built for the same (or an even lower)
cost than a more traditional building. In
most of the government case studies of
sustainable buildings included in this
document, the first costs were not higher than
the original budgeted amount.

58. The following are some design and construction
strategies that a team can use to reduce first
costs. Optimize site and orientation. One
obvious strategy to reduce first costs is to
apply appropriate siting and building
orientation techniques to capture solar
radiation for lighting and heating in winter
and shade the building using vegetation or
other site features to reduce the summer
cooling load. Fully exploiting natural
heating and cooling techniques can lead to
smaller HVAC systems and lower first costs.

59. • Re-use/renovate older buildings and use
recycled materials. Re-using buildings, as well
as using recycled materials and furnishings,
saves virgin materials and reduces the energy
required to produce new materials. Re-using
buildings may also reduce time (and therefore
money) associated with site planning and
permitting.

60. • Reduce project size. A design that is space-
efficient yet adequate to meet the building
objectives and requirements generally
reduces the total costs, although the cost
per unit area may be higher. Fully using
indoor floor space and even moving certain
required spaces to the exterior of the
building can reduce first costs considerably.

61. • Eliminate unnecessary finishes and features. One example
of eliminating unnecessary items is choosing to eliminate
ornamental wall paneling, doors (when privacy isn't
critical), and dropped ceilings. In some cases, removing
unnecessary items can create new opportunities for
designers. For example, eliminating dropped ceilings might
allow deeper daylight penetration and reduce floor-to-floor
height (which can reduce overall building dimensions).

62. • Avoid structural overdesign and construction
waste. Optimal value engineering and advanced
framing techniques reduce material use without
adversely affecting structural Performance.
Designing to minimize construction debris (e.g.,
using standard-sized or modular materials to avoid
cutting pieces and generating less construction
waste) also minimizes labor costs for cutting
materials and disposing of waste.

63. • Use construction waste management
approaches. In some locations, waste disposal
costs are very high because of declining
availability of landfill capacity. For instance, in
New York City, waste disposal costs about Rs.
200 per ton. In such situations, using a firm to
recycle construction waste can decrease
construction costs because waste is recycled at
no cost to the general contractor, thereby saving
disposal costs.

64. Carpet with recycled content. A range of
environmentally preferable carpet products is
currently available on the market, including
refurbished used carpet and new carpet made
from various combinations of old carpet,
carpet scraps, carpet backing, auto parts, soda
bottles, and flooring materials. The quotes
gathered for this study indicate that such
sustainable carpet options can cost as much as
Rs 500/-less per yard than traditional carpet
(although some price quotes indicated the
recycled carpet was more expensive).

65. Low-emitting paint and recycled paint. Low-emitting
paint has very low or no emissions of volatile organic
compounds (VOCs) when it is applied. For building
occupants, the paint significantly reduces negative
reactions that normal latex paint often causes and allows
buildings to be occupied during or shortly after the paint
is applied. Price quotes gathered for this study vary, but
some indicate that low-emitting paint can cost Rs 150/-
per 10 liters less than normal paint and can cover more
surface area per gallon.