Introduction of Economics
• Economics :- Economics is the subject that deals with problem of choice its main objective is
to maximize the profit level of producer as well as satisfaction level of the consumer.
• Economics is the subject of the social science that tell about how to deal money so that the
objective of people who resides in economy can be full fill.
• Economy:- Economy is system that provides or gives opportunity to the people so they can
earn their livings.
• The father of economics is Adam smith 1776.
• Adam smith give the concept of economics in his book that was “An Enquiry into the nature
and causes of the wealth of the nation “
• The term of economics has been drive from Greek language 1. OIKIOS 2. NEMIEN
OIKIOS means Household and mean the management, in a simple we can say that economics
is the subject that tells us that how to manage economy as a whole.
• In initially economics has single dimension (Micro Economics ) further it is divided into two
parts [Link] & 2. Macro
• Both term comes from the latin language 1. Mikro = Micro (small/individual)
2. Makro = Macro (Big / Aggregate/ Whole )
Approches of Economics
• Wealth: Initially, economics was seen as the "science of wealth," focusing on the production,
distribution, and consumption of goods and services, according to Adam Smith.
• Welfare: Alfred Marshall shifted the focus to human welfare, arguing that wealth is a means
to an end, and that economics should also study the factors affecting human well-being,
• Scarcity: Lionel Robbins emphasized the concept of scarcity, arguing that economics is the
study of how societies allocate scarce resources to satisfy unlimited wants.
• Growth: Paul Samuelson introduced the concept of economic growth, focusing on the
factors that contribute to the sustained increase in an economy's productive capacity.
Economic Activities:
• Definition: Activities related to the production, buying, and selling of goods and services in
exchange for money or other monetary value.
• Examples: Working in a factory, selling goods in a shop, providing services like healthcare or
education, or investing in financial markets.
• Motivation: Primarily driven by the desire to earn a profit or income.
• Measurement: Usually measured in monetary terms (e.g., wages, profits).
Non-Economic Activities:
• Definition:
Activities undertaken for personal satisfaction, social well-being, or enjoyment without a direct
monetary exchange.
• Examples:
Spending time with family, volunteering for a charity, pursuing a hobby, participating in religious or
cultural practices, or engaging in leisure activities.
• Motivation:
Driven by personal satisfaction, social connection, or other non-monetary factors.
• Measurement:
Usually measured in non-monetary terms (e.g., happiness, social connection).
Problem of choice and its reason
The "problem of choice" arises in economics because of scarcity, meaning resources are limited while
human wants are unlimited. This forces individuals, firms, and societies to make decisions about how
to best allocate those scarce resources, leading to choices and opportunity costs.
• Unlimited Wants:
People have a seemingly endless desire for goods and services, which is impossible to satisfy with
limited resources.
• Scarce Resources:
The resources available to produce goods and services (like land, labour, and capital) are finite and
cannot satisfy all unlimited wants.
• Alternative Uses:
Resources have multiple potential uses. For example, land can be used for agriculture, construction,
or recreation.
Central problem of Economy
The central problems of an economy revolve around three key questions: what to produce, how to
produce, and for whom to produce. These problems arise because of the fundamental economic
issue of scarcity, where resources are limited while human wants are unlimited. Every society must
address these challenges to efficiently allocate resources and ensure societal welfare.
• What to produce?
This involves deciding which goods and services to produce and in what quantities, given limited
resources. It requires prioritizing needs and wants, as it's impossible to produce everything.
• How to produce?
This focuses on the techniques and methods used to produce goods and services. For example,
should production be labor-intensive or capital-intensive? This decision impacts efficiency, cost, and
employment levels.
• For whom to produce?
This deals with the distribution of goods and services. How are the products and services produced
allocated among the population? This question impacts income inequality, and the satisfaction of
different groups' needs and wants.
• Difference between micro and macro economics
• Difference between normative and positive economics
Concept of PPC
It is a graphical representation of all the possible combinations of two goods that can be produced
by the optimum (fuller) utilisation of available resources and the given technology.
It gives us the maximum limit of goods and services that could be produced. So, it is also known as
the production possibility boundary or production possibility frontier (PPF).
Shape of PPC • It is downward sloping from left to right and concave to the
point of origin.
Reason of It is downward sloping because to produce one more unit of
Concave Shape resource, we have to sacrifice a few units of another one as the
of PPC resources are already being fully utilised.
Production Possibility Curve is concave-shaped due to increasing
MRT, i.e., to produce every additional unit of a commodity, more
and more units of another commodity are sacrificed.
{Reason for increasing MRT: Resources are not equally efficient}
Shifting of PPC to Right PPC shifts to rightward because of the following reasons.
• Growth of resources
• Improvement in technology
Diagram
Tabular
Representation Production Capital Agricultural MRT (Change in capital goods/Change
Possibilities goods goods in agricultural goods)
(in units) (in units)
A 15 0 –
B 14 1 1:1
C 12 2 2:1
D 9 3 3:1
E 5 4 4:1
F 0 5 5:1
