Definition of Economics, Scope of Economics, Microeconomics & Macroeconomics, Opportunity Cost, marginalise, Market Coordination, Goods and Service Protocol.

1. INDIAN ECONOMICS
PGDM 2
DINKER VAID

2. Definition of Economics
Starts From Scarcity
All economic questions arise because we
are unable to satisfy all our wants.
Our inability to satisfy all our wants is
called scarcity.
Economics is the social science that studies
the choices that we make as we cope with
scarcity and the institutions that have
evolved to influence and reconcile our
choices.

3. A Definition of Economics
 Economics is the study of how
individuals and societies choose to use
the scarce resources that nature and
previous generations have provided.
 Economics is the study of how scarce
resources are allocated among
conflicting demands.

4. Economics: A Social
Science
Economists cannot easily do experiments.
To isolate the effect of interest, economists use
the logical device called ceteris paribus, or
“other things being equal.”
Economists try to isolate cause-and-effect
relationship by changing only one variable at a
time, holding all other relevant factors
unchanged.

5. Economics: A Social
Science
Economists cannot easily do experiments.
To isolate the effect of interest, economists use
the logical device called ceteris paribus, or
“other things being equal.”
Economists try to isolate cause-and-effect
relationship by changing only one variable at a
time, holding all other relevant factors
unchanged.

6. THE TYPES
Microeconomics
Microeconomics is the study of choices made
by individuals and businesses, the way these
choices interact, and the influence that
governments exert on them.
Macroeconomics
Macroeconomics is the study of the effects on
the national and global economy of the choices
that individuals, businesses, and governments
make.

7. The Scope of Economics
EXAMPLES OF MICROECONOMIC &MACROECONOMIC CONCERNS
Microeconomics
Production
Production/Output in
IndividualIndustries and
Businesses
How much steel
How manyoffices
How manycars
Prices
Price of Individual
Goods and Services
Price of medical care
Price of gasoline
Food prices
Apartment rents
Income
Distribution ofIncome
and Wealth
Wages inthe auto
industry
Minimum wages
Executive salaries
Poverty
Employment
Employment by
Individual Businesses &
Industries
Jobs inthe steel industry
Number ofemployees in
a firm
Number ofaccountants
Macroeconomics
National
Production/Output
Total Industrial Output
GrossDomestic Product
Growth ofOutput
Aggregate Price Level
Consumer prices
Producer Prices
Rate of Inflation
National Income
Totalwages andsalaries
Totalcorporate profits
Employment and
Unemployment inthe
Economy
Total number ofjobs
Unemployment rate

8. 1. To Learn a Way of
Thinking...
 Three Fundamental Concepts of Economic
Thinking
 Opportunity Cost
 Marginalism
 Information, Incentives, and Market
Coordinations

9. Opportunity Costs
 The opportunity cost of something is that
which we give up when we make that choice
or decision.
 The implication is that all decisions involve
trade-offs.
 “There’s no such thing as a free lunch!!”

10. Margins and Incentives
People make choices at the margin,
which means that they evaluate the
consequences of making incremental
changes in the use of their resources.
The benefit from pursuing an
incremental increase in an activity is its
marginal benefit.
The opportunity cost of pursuing an
incremental increase in an activity is its
marginal cost.

11. 2. Understanding Society
 Present and past economic decisions have an
enormous influence on the character of life
in a society.
 The state of our physical environment, the
level of material well-being, and the nature
and number of jobs are all products of the
economic system.

12. Three Big Microeconomic
Questions

13. Three Big Microeconomic
Questions
How are Goods and Services Produced?
Factors of production are the resources that
businesses use to produce goods and services.
They are grouped into four categories:
 Land
 Labour
 Capital
 Entrepreneurship

14. Three Big Microeconomic
Questions
The “gifts of nature” that we use to produce
goods and services are land.
The work time and effort that people devote
to producing goods and services is labour.
The quality of labour depends on human
capital, which is the knowledge and skill that
people obtain from education, on-the-job
training, and work experience.

15. Three Big Microeconomic
Questions
The tools, instruments, machines, buildings,
and other constructions that are used to
produce goods and services are called capital.
The human resource that organizes land,
labour, and capital is entrepreneurship.

16. Three Big Microeconomic
Questions
For Whom are Goods and Services Produced?
Who gets the goods and services depends on
the incomes that people earn.
 Land earns rent.
 Labour earns wages.
 Capital earns interest.
 Entrepreneurship earns profit.

17. THANKYOU