5. Science of dynamic growth and development – Paul A. SamuelsonVarious Definitions of Economics and their advocates:
6. Micro Economics: Studies the economic behavior of an individual, firm or industry in the national economy. It covers product pricing, consumer behavior, factor pricing, economic conditions of a section of people, study of firms and location of an industry. Macro Economics: Studies the economic behavior of large aggregates. It covers national income and output, general price level, balance of trade and payments, external value of money, saving and investment, and employment and economic growth. Micro and Macro Economics:
7. Economics as Positive Science and Economics as Normative Science: Positive Science: A positive or pure science analyses cause and effect relationship between variables but it does not pass value judgement. Micro and Macro Economics:
9. Divided into four basic economic problems: What to produce? How to produce? For whom to produce? What provisions (if any) are to made for economic growth Central Economic Problems:
10. It graphically represents the alternative production possibilities facing an economy. PPC is concave to the origin due to the principle of increasing opportunity cost. If opportunity costs were constant, PPC would be a straight line. Production Possibilities Curve:
11. Capitalist economy: It uses the impersonal forces of the market demand and supply or the price mechanism to solve its central problems. Socialist economy: There is a central planning agency or central authority to make major economic decisions, such as what to produce, when and how much to produce etc. Mixed Economy: Here, government runs important and selected industries, while the other means of production are owned by the private enterprise. How different economies solve their Central Economic Problems
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