Unit 2-1-economics-management

1. Lecture Series Unit No. 2:
Topic: (1) Economics & Management
(Course: Forensic Accounting & Homeland Security,
GFSU)
CA Vikram Shankar Mathur
BA (Eco) Hons, FCA, DISA (ICAI), FAFP (ICAI)
Contact No: +91-9998090111 or +91-8460890111.
Email: vsmathurco@gmail.com or vsmathur@ahmedabadfca.com
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2. Definition of Economics
 “Economics is a broad term referring to the scientific study of human
action, particularly as it relates to human choice and the utilization of
scarce resources.”
(http://www.investopedia.com/terms/e/economics.asp).
 Economics is the one subject that affects our lives the most, as it is used
by individuals, firms, societies, industries and nations on a day-to-day
basis. Unlimited ends and scarce resources have to be optimized in such
a way that output is maximized using minimum input.
 In 1776 Adam Smith published “The Wealth of Nations”, and came to be
known as the Father of Economics. In this, he explains that the free
market, while appearing chaotic and unrestrained, is actually guided to
produce the right amount and variety of goods by a so-called “invisible
hand”.
 John Stuart Mill advocated that a market has two distinct roles – that of
allocation of resources and distribution of income.
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3. Economics – Views & Theories
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4. Stages of Economic Growth
 PRIMITIVE STAGE
 Hunting
 Fishing
 PASTORAL STAGE
 Trading of Cattle etc.
 Private Property Ownership
 AGRICULTURAL STAGE
 Cultivation of Land
 Land – Primary Property
 INDUSTRIAL STAGE
 Emergence of Machines
 Factories – Large-scale production
 Expanding markets
 Development of Monetary markets
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5. What is meant by “Economy” ?
 Economy refers to the conditions under which goods are produced in a society
and the manner in which people are gainfully employed.
 It may be defined as the system of production, distribution and consumption of
goods and services that a society uses to tackle the problem of scarcity of
resources and the multiplicity of uses that they can be put to.
 An economy in which people are well employed and thus have high standards of
living and high per capita income, is known as a rich economy. Conversely,
where employment and per capita income is low is known as a poor economy.
 An economy where the state is the owner of the means of production and people
are employed as per the government’s prescription is a socialist economy. Where
production and employment is controlled by private entrepreneurs it is a capitalist
economy. A mixed economy would be one where the government retains
ownership of core and capital intensive means of production and the rest is open
for the private entrepreneurship.
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6. Essential processes of any economy
PRODUCTION: Any economic activity directed towards the
satisfaction of human wants is known as production.
CONSUMPTION: The act of satisfying one’s wants is called
consumption. Goods and services are produced only because
human wants need to be satisfied.
INVESTMENT: The addition made to total stock of capital is called
investment. This addition can only be made from what remains
from production that are not consumed, therefore called SAVINGS.
An economy that consumes all that it produces cannot grow, and
that cannot happen without adequate investment over time to grow
it’s stock of capital.
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8. Fundamental problems of an economy
 What to Produce: Calls for deciding which goods to produce and in what
quantities. This is because resources are scarce, hence need to be
optimized. Consumer Goods are those that are directly utilized by
consumers to satisfy their wants. Produced Goods are those that are
used to produce further goods, for example, machine, tools etc are the
latter, while butter bread, shoes etc are the former.
 How to Produce: What combination of resources and technology should
be used to produce goods is the next problem, as there could be various
alternative methods in which goods are produced. Labor-intensive
methods are those where manual methods are used and Capital-
intensive methods are those where machines are largely used.
 For Whom to Produce: Distribution of goods and services among the
various members of the economy is what needs to be addressed next.
This can be summarized as the problem of sharing the National Product
and it’s distribution.
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9. Some Basic terms and concepts
1. Goods
2. Utility
3. Value
4. Price
5. Wealth
6. Income
7. Yield
8. Profit
9. Want and Need
10. Saving
11. Input
12. Output
13. Firm
14. Market
15. Resources
16. Scarcity
17. Opportunity Cost
18. Equilibrium
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18. Thank you for your
patience!!
CA Vikram Shankar Mathur
+91-9998090111 / +91-8460890111
(Available on WhatsApp on both numbers, anytime)
vsmathurco@gmail.com vsmathur@icai.org
FB Page: http://fb.me/fcavsmathur.faculty
Website: http://fcavsmathurfaculty.wordpress.com