This document provides an overview of key concepts in economics. It defines economics as the study of choice and decision making given scarce resources (Adam Smith). It discusses the history of economics beginning with Adam Smith and the Wealth of Nations. It also covers core economic concepts like production, consumption, goods, services, markets, supply and demand, competition, interest rates, different types of economies, and more. The document serves as a high-level introduction to economics and the fundamental topics within the field.

1. Economics

2. What is economics?
• The study of choice and decision making in a
world with limited resources.
• “Economics is an enquiry into the nature and
causes of wealth of nations” …..Adam Smith.
• “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. Thus, it is
on one side a study of wealth and on the other
and more important side, a part of the study of
man.
• Money, goods, services, banking… Dr.Alferd
Marshal

3. • “Economics is the science which studies
human behavior as a relationship between
ends and scarce means which have
alternative uses.”
…….Robbins
• “Economics is the study of the
administration of scarce resources and of
the determinants of income and
employment” ……Lord J.M. Keynes

4. History of Economics
• Adam Smith The Wealth of Nations
• Explained how prosperous economies work
• Free Market Economy
• Self-determination
• Divisions of labor

5. Elements
• Production of goods and
services
• Distribution of goods and
services
• Consumption of goods
and services

6. Goods vs. Services
Goods
• Food
• Clothing
• Homes
• Computers
• Anything that people want
or need
Services
• Cell phone service
• Internet
• Maids
• Anything that someone
does for someone else

7. Products
• Goods or services
• Bought or sold
• Surplusan over abundance of goods or
services
• Imports/Exports
• Resources

8. Supply vs. Demand
Supply
• Amount of a goods or
services available for a
price
• Determined by income,
technology, natural
occurrences and
availability of natural
resources
Demand
• What a people want or
need
• Determined by income,
trends, and population

9. Equilibrium Price

10. Consumers
• People who buys goods and services

11. Price
• Money paid for a good or service
• Determined by Supply and Demand
• Can be done with trade or barter
• Inflation

12. Market
• A place where buyers and sellers go to
trade, barter or pay for goods or services

13. Types of Economies
• Command Economy
• The government controls business and
natural resources
• Soviet Union

14. Types of Economies
• Traditional Economy
• Use traditional methods

15. Types of Economies
• Mixed Economy
• Uses two economical systems
• United States
• Government and private ownership

16. Types of Economy
Free Market (Adam Smith’s idea)
• No government intervention (or very little)
• Consumers decide what their wants and
needs are
• Consumers can buy anything they choose
• Capitalism

17. Competition
• Multiple businesses selling the same goods
or services
• Monopoly-when one business prevents
competition by being the only one who sells
a type of good or service.

18. Interest
Simple:
• Paid only on the principal
• Can be paid daily, weekly, monthly, annually
• Example:
• $100 principal
• .06 is the interest
• If it is paid annually
• 100X.06=6.00
• 6.00x12=72.00
• After one year 172.00

19. Interest
Compound
Paid on the principal plus interest
If it is paid monthly:
Principal 1st Month 2nd Month
$100 100x.06=$6.00
100+6.00=$106
106x.06=$6.36
106+6.36=112.36

20. Prime Interest
• Best interest to the best customers
• Best customers have good credit
scoresdetermined by payment history,
amount of debt and income

21. Government Investments
Human
• Education: loans, grants
• Health: medicaid and
medicare
• Training: Job Corps,
Military
Physical
• NASA
• Transportation
• Defense

22. Brainpop Videos
• www.brainpop.com
• User: Kyrene
• Password: Brainpop
• Watch “Supply and Demand” and “Interest
Rates”
• http://ecedweb.unomaha.edu/Dem_Sup/dema
nd.htm
• http://www.virted.org/ECONOMICS/EconMai
n.html

23. Agricultural economics
• “Agricultural economics is an applied branch
of economics in which the principles of
economics are applied to agriculture”.
• Agricultural economics includes
combination of farm enterprises, methods
of production, use of credit and capital,
marketing and inputs and outputs, resource
use at micro and macro levels.
• Welfare of country through food security.

24. SUBJECT MATTER OF ECONOMICS
• PRIMITIVE VIEW
• TRADITIONAL VIEW
• MODERN VIEW

25. SUBJECT MATTER OF
ECONOMICS
A. Primitive View of economic activities
WANTS
EFFORTS
SATISFACTION

26. TRADITIONAL VIEW
WANTS
EXCHANGE
EFFORTSDISTRIBUTION
SATISFACTION

27. MODERN VIEW
• Traditional approach is only
(Price theory/Micro Economics)
• but, Modern approach is
(Income and Employment theory/Macro
Economics)
• Now, study of economics as whole is
(Price theory/Micro Economics) + (Income and
Employment theory/Macro Economics)
• Economics of growth and Economics of
development…………real view.

28. SCOPE AND IMPORTANCE
• Subject matter of economics
(micro and macro economics)
• Economics is a social science
(Daily life…food, clothing, shelter)
• Economics is a science or an art
(sugarcane production 100 tonne)
• Economics is positive or normative science
(wealth poor and rich distribution)

29. IMPORTANCE
• A ( Theoretical importance)
• Informative (man’s behavior when he is
engaged in economic activity)
• Mental training ( news paper propaganda)
• Functioning of economic system
(inflation….functions automatically without
any central control)
• Mutual dependence
• Useful citizenship (most of the problems today
are economic in character…….)

30. • B PRACTICAL IMPORTANCE
• Professional value (banker, businessmen,
agriculturist, industrialist)
• Useful for household (family budget)
• Useful for labour leader (sugar factories)
• Solving problems of poverty

31. • GOOD “Anything which satisfies human
wants is called as good”
• “Goods means the commodity that we use,
and Services are referred to the work that
person may do”.
• Goods are tangible and services are
intangible.
• Economic goods are those goods which are
scarce and can be had only payment i.e.
money.

32. GOODS
EXTERNAL GOODS
MATERIAL GOODS
TRANSFERABLE GOODS
(land building, furniture)
NON TRANSFERABLE
GOODS
(degree certificate, driving
license)
PERSONAL GOODS
TRANSFERABLE GODS
(good will of business)
NON TRANSFERABLE
GOODS
(Personal qualities like
ability, intelligence,
friendship, courage)
INTERNAL GOODS

33. • Free goods & economic goods
• Consumption goods(create satisfaction
directly)
• Capital goods (help to produce other goods
that is tools and machineries)
•
• Intermediate goods (goods between
consumption and capital goods)
• (Textile machinery- cotton – cloth)
• Private and public goods.

34. UTILITY
• “The want satisfying quality in a good is called
utility”.
• Utility means the power to satisfy human
wants
• Characteristics of utility
• Utility and usefulness (opium and poison)
• Utility and pleasure (quinine as medicine)
• Utility and satisfaction (not itself satisfaction)
• Utility is subjective (blind man concern with
eyes)

35. FORMS OF UTILITY
• FORM UTILITY (wood to chair)
• PLACE UTILITY (Utility can be increased by
transportation i.e. forest to city….above e.g.)
• TIME UTILITY (By storing that piece of
wood and selling at time of scarcity)

36. MEANING OF VALUE
• “value mean the commodities or services
that we can get it return for it, it is in in
short, its purchasing power in terms of
other commodities and services”.
• Attributes in commodity (utility, scarce, and
marketable)
• Value in use and Value in exchange
• In economics “value in exchange”…..follows
• “When value is expressed in terms of money,
it is called PRICE

37. • WEALTH is synonymous with economic good.
• ATTRIBUTE of wealth (utility, scarcity, and
transferability/ marketability)
• “if a thing possessed utility, but is not scarce
and vice versa , it is not wealth.)
• Honesty, skill, ability, and intelligence are not
wealth………there are source of
wealth……because there are not transferable

38. • Welfare : “well being of an individual or
community “
• Wealth is a path of welfare as our desires
are satisfied by the means of wealth
• Welfare is condition of mind , hence it
differs from individual to individual.
• Wealth is mean and welfare the end

39. WANTS
• “MAN IS A BUNDLE OF DESIRES/WANTS”
• Some wants are natural (food clothing
shelter)
• Wants vary with individual to individual and
they multiply with civilization

40. CHARACTERISTICS
• Wants are unlimited
• Particular want is satiable(can satisfy it)
• Wants are complementary
• Wants are competitive
• Wants are also competitive and complementary
• Wants are alternative
• Wants vary with time place and person
• Wants vary with urgency
• Wants multiply with civilization
• Wants recur in nature
• Wants can change into habit

41. CHARACTERISTICS
• Wants are influenced by income salesmanship and
adversitment
• Wants are results of custom or convection
• Present wants are important than future wants

42. CLASSIFICATION OF WANTS
• NECESSARIES : (Existence, efficiency, conventional (social
custom) )
• COMFORT : (For student book and chair is necessity,
• But, cushion chair is comfort)
• LUXURIES : It is defined as a superfluous consumption
• (shower baths, silk cloths, jewellery, washing machine…..)
• IMPORTANCE OF WANTS
• Give birth to important economic laws (law of diminishing,
equimarginal utility)
• Demand and supply
• Public finance and expenditure
• Theory of interest , taxes, consumer surplus.

43. CONSUMPTION
• Consumption mean the satisfaction of our wants by the use
of commodities and services
• Consumption is also defined as destruction of utility.
• (satisfaction of human want, spending of money income,
expenditure of income)
• TYPES OF CONSUMPTION
• DIRECT/FINAL CONSUMPTION (FOOD)
• INDIRECT OR PRODUCTIVE CONSUMPTION
(SEWING MACHINE)

44. • IMPORTANCE OF CONSUMPTION
• Beginning as well as the end of economic activity
• Production is stimulated by consumption
• Without consumption there would be no exchange and
distribution
• Flow of income
• Discovery of new products and new processes
• Influence of exchange
• Direct and guide production (economic activity)
• Standard of living