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Economics

Economics

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Published by Pankaj Gill
Definition of Economics, Nature of Economics Problems, Production Possibility Curve, Economics Law and their Nature, Relation Between Science, Engineering, Technology and Economics,

Concepts and measurements of utility, Law of Diminishing Marginal Utility, Law of Equi-marginal Utility – its practical application and importance.
Definition of Economics, Nature of Economics Problems, Production Possibility Curve, Economics Law and their Nature, Relation Between Science, Engineering, Technology and Economics,

Concepts and measurements of utility, Law of Diminishing Marginal Utility, Law of Equi-marginal Utility – its practical application and importance.

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Published by: Pankaj Gill on Apr 11, 2013
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Unit 1
E
NGINEERING
E
CONOMICS
 
[
ASSIGNMENT ONECONOMICS
] 
Definition of Economics, Nature of Economics Problems, Production Possibility Curve,Economics Law and their Nature, Relation Between Science, Engineering, Technology andEconomics,Concepts and measurements of utility, Law of Diminishing Marginal Utility, Law of Equi-marginal Utility
 –
its practical application and importance.
 
 
A
SSIGNMENT
ON
 
E
CONOMICS
2
Engineering Economics
What is Economics?
Economics is the study of the production and consumption of goods and the transfer of wealth toproduce and obtain those goods. Economics explains how people interact within markets to getwhat they want or accomplish certain goals. Since economics is a driving force of human interaction,studying it often reveals why people and governments behave in particular ways.There are two main types of economics: macroeconomics and microeconomics. Microeconomicsfocuses on the actions of individuals and industries, like the dynamics between buyers and sellers,borrowers and lenders. Macroeconomics, on the other hand, takes a much broader view byanalysing the economic activity of an entire country or the international marketplace.
A study of economics can describe all aspects of a country’s
economy, such as how a country uses itsresources, how much time labourers devote to work and leisure, the outcome of investing inindustries or financial products, the effect of taxes on a population, and why businesses succeed orfail.
Nature of Economic Problem?
The economic problem, sometimes called the fundamental economic problem, is one of thefundamental economic theories in the operation of any economy. It asserts that there is scarcity,that the finite resources available are insufficient to satisfy all human wants. The problem thenbecomes how to determine what is to be produced and how the factors of production (such ascapital and labour) are to be allocated. Economics revolves around methods and possibilities of solving the economic problem.
Definition
According to Robert Awh, “Economic problem is the problem relating to the necessity of thechoosing what, how and for whom to produce and how to achieve economic growth.”
 
Concepts in the economic problem1.
 
Wants
While the basic needs of human survival are important in the function of the economy,human wants are the driving force which stimulates demand for goods and services. Inorder to curb the economic problem, economists must classify the nature and differentwants of consumers, as well as prioritize wants and organize production to satisfy as manywants as possible. One of the assumptions made in economics and the methods whichattempt to solve the economic problem is that humans are overall greedy, and thus themarket must produce as much as possible to satisfy them. These wants are often classifiedinto
individual wants
(which depend on the individual preferences and an individual'spurchasing power parity) and
collective wants
(those of entire communities). Things such asfood and clothing can be classified as either wants or needs, depending on what type of good and how often.
 
A
SSIGNMENT
ON
 
E
CONOMICS
3
Engineering Economics
2.
 
Choice
 
The economic problem fundamentally revolves around the idea of choice. Due to the limitedresources available, businesses must determine what to produce first to satisfy demand.Consumers are obviously the biggest influences of this choice, as the goods which they wantmust also fit within their budgets and purchasing power parity. Different economic modelsplace choice in different hands. Socialism asserts that (at least) some economic choices arebest made for the greatest good of society if they are made at the societal level foreveryone, e.g. via a government agency. Communism takes this further and argues thatmost or even all major economic choices should be made through central planning by thegovernment. Only by constructing a cohesive plan that takes the good of everyone intoaccount, so the thinking goes, can the best allocation of resources be achieved. Capitalismargues for a more laissez-faire approach, wherein the role of the government is to protectthe property rights of individuals and companies so that they can have the confidence toundertake the economic activity (and risks) that will create the most value. In a free-marketeconomy without the constraints of government wage and price controls, proponents of market capitalism argue, resources are automatically allocated toward the things thatsociety, collectively, values most. If a good or service is overvalued (i.e., the price is toohigh), the surplus will force providers of the good or service to lower their prices or to re-allocate their capacity to produce something more worthwhile. If the supply of a good orservice is inadequate, rising prices increase the value and so cause more production capacityto be directed toward the item. Adam Smith's The Wealth of Nations has been an extremelyinfluential book for this school of thought.
Causes of Economic Problem:
1.
Unlimited wants:
 Human wants that can be satisfied by consuming goods and services and unlimited. Noindividual can fully satisfied his wants. Wants of all the members of society cannot be fullysatisfied in a given time. In reality, human wants have been multiplying day in and day out.It is therefore, be said that at any given time there do exist innumerable unsatisfied wants ina community. Example, want to Home theatre systems, deluxe cars, LCD TV.2.
Limited Needs:
 Large numbers of goods and services are needed to satisfy human wants. To satisfy hungerone needs bread, fruit or milk.Accordingly goods and services satisfying human wants are divided into two parts:a)
Free goods
 One has not to pay any price to get these goods and services. Example air, sunshineetc.b)
Economic goods:
 One has to pay price to get economic goods and services. They are also called asscares means. Example bread, fruit or services doctor and lawyers etc.

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