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Sesn 1.1

Sesn 1.1

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Published by: Shailesh Yadav on Apr 18, 2011
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Bachelors in Business Administration

Unit – I BUSINESS ECONOMICS

Session 1.1 Introduction to Economics

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THE FUNDAMENTALS OF ECONOMICS SESSION 1.1

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Session Objectives • By the end of this session you will be able to: – – – – Understand Economics and its nature Basic three economic problems Recognize various aspects of Economics Identify the Significance of Economics In Collaboration with .

In Collaboration with .Some Decisions Economists Have Analyzed • Whether to buy a car this week & which car • Whether to go to college.. which one • Whether to invest in a restaurant or in a mall • Whether to take a Life Insurance or a ULIP And so on. and if so.

manufacturing or services. land intensive? Efficiency? intensive.The Basic Economic Problems • What Goods & Services should be produced? – should the emphasis be on agriculture. capital • Who should get the Goods & Services produced? – even distribution? more for the rich? for those who work hard? In Collaboration with . should it be on sport and leisure or housing? • How should produced? Goods & Services be – labour intensive.

Society & Scarce Resources • The management of resources is important resources are scarce • Scarcity. . . – means that society has limited resources and therefore cannot produce all the goods and services people wish to have society’s because In Collaboration with .

Introduction • Economics was political economy formerly called • The term Political economy means the management of the wealth of the state In Collaboration with .

Economics • Economics is classified as: – – – – 1. Science of choice making and 4. Science of wealth 2.Science of dynamic growth development and In Collaboration with . Science of material well-being 3.

Smith’s Father of Economics – He defined economics as the study of nature.Wealth Definition (Classical) • Adam definition is known as wealth definition. causes and growth of national wealth in his book “An Enquiry into the Nature and Causes of the Wealth of Nations” (1776) • Smith considered acquisition of wealth as the main objective of human activity In Collaboration with .

” • Marshall considered that the primary object and end of economics is the promotion of material welfare. and more important side.Science of Material Well Being (Neo Classical) • In the words of Marshall – “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. a part of the study of man. which is part of human welfare In Collaboration with .

Science of Choice Making (Modern Definition) • Robbins defines Economics as – "Economics studies human behavior as a relationship between ends and scarce means which have alternative uses.” • Robbins considers economics as a positive science which describes reality without stating the desirability • Modern Economics is based upon this In Collaboration with .

to employ scarce productive resources which could have alternative uses.” In Collaboration with . He says.A. with or without the use of money. – “Economics is the study of how man and society choose. to produce various commodities over time and distribute them for consumption now and in the future among various people and groups of society. Samuelson gave a modified version of scarcity definition. It analyses the costs and benefits of improving patterns of resource allocation.Science of Dynamic Growth & Development (Growth Oriented Definition) • P.

Nature of Economics • We will now study the nature of Economics – Economics is science or art or both and if it is a science whether it is a positive science or a normative science or both In Collaboration with .

Economics as a Science • Economics is science because: • It is a systematized body of knowledge which studies the relationship between cause and effect – E.g. it explains cause and effect relationship between price and demand for a commodity. It is capable of measurement In Collaboration with .

Economics as a Science • It is capable of measurement – It can be measured in terms of money • It has its apparatus own methodological – i.e. induction and deduction • It should have the ability to forecast .It forecasts the future market condition with the help of various statistical and non-statistical tools In Collaboration with .

production. consumption. public finance. provide practical solutions to various economic problems. If we analyze Economics. It helps in solving various economic problems which we face in our day-to-day life • Thus. we find that it has the features of an art also. Economics is both a science and an art.Economics is an Art • Art is nothing but practice of knowledge. It is science in its methodology and art in its application In Collaboration with . etc. – Its various branches.

It is ends. It does not assign value 4.Positive & Normative Economics Positive Economics Normative Economics 1. 3. It regulates in order to achieve idealized norms. 2. It explains situation and gives policy prescriptions explicitly. It explains cause and 2. neutral between 3. It assigns value judgments judgments and explains rightness or wrongness of a thing In Collaboration with . It explains actual 1. behavior of economic agents. It prescribes norms for welfare of the society. effect. 4.

5000 less than the national average 2. Your salary is Rs. Your salary should be much more than it is now In Collaboration with .Positive or Normative Statements? 1.

Significance of Economics • Economics provides answers to most important questions • Indicates the effects alternative actions of various • Provides a logical basis for choice among the possible alternatives In Collaboration with .

unemployment. inflation etc.Significance of Economics • Helps Government in formulating. and ways to remove In Collaboration with . changing and modifying policies • Allocates scarce resources in the best possible manner • Helps in studying the causes of poverty.

Recap Session • From the understood: session you have – The Nature & Definition of Economics – The various aspects of Economics – The significance of Economics In Collaboration with .

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