Economics Assignment

The Central Concepts of Economics: A Managers point of View

Introduction:
Economics is an approach. It is It's about how we as a society distribute resources in the face of
scarcity. The fundamental problem that economics seeks to address is: given the fact that nothing
exists in unlimited supply we must make trade-offs.

Example: Petroleum/ fuel is a resource that is very limited in nature but is required to
produce energy in different forms, so we need efficiently utilize it. For this we have
designed vehicles that consume less of fuel and run longer distances. This way we are
getting the maximum benefit from the fixed limited supply.
Concepts of Economy:
Rationality:
Rational behaviour facilitates decision making that may not always give the best possible returns
materially. It strives to achieve benefits that are most optimal in nature to the decision maker, be
it monetary or non-monetary..

Choice:
Any entity we choose that has a predefined monetary value attached to it is called as
Choice. All our choices have a benefit or cost associated with them.
Opportunity Cost:
Basically, this is the cost that you give up so you can have something else. It's the next best
alternative.

Concepts of Economy forms the basis/ core for many areas like Marketing Finance,
Managerial Accounting, and Strategy etc.
Classification of Economics:
Economics is divided into three broad categories
Micro EconomicsThe study of individual consumers and producers in specific markets which includes
pricing of factors of production, cost structures and distribution of income and output in
population.
Macro EconomicsThis branch of economics deals with the aggregate economy which includes the six main
factors of economy- GDP, inflation, interest rates, exchange rates and unemployment.
International Economics:

It handles a broader view of a business environment. It is relevant to both domestic and

multi-national companies which comes into existence in the market due to globalisation.
Economic Problems:
There are three main problems are What goods and services are produced and in what
quantities, How should these goods and services be produced and for whom. All
countries must deal with these three basic questions. This problems arise due to scarcity
of resources.
Types of Economies:
There are three important types of economies prevalent:
Market economy:
in a market economy, there is minimal government interference in the market (ie. no price controls,
regulations, etc). The only government interference that is necessary is the enforcement of property
rights, laws that penalize fraud, and a court system. Property is owned privately, not by the
government in any form, all transactions are voluntary, and the means of production are owned by
private individuals or voluntary associations.US,

UK are few of the nations which has market

economy.
Command economy:
The economy in which the government takes all the major economic decisions and holds
the rights on all the resources of the nation is called as Command economy. Economy in
which government planning dominates the direction of economic activity, and market
forces are not allowed to do so to any considerable degree. North Korea, Cuba are
examples of this kind of economy
Mixed economy:
A mixture of planned and free-market policies, limited government intervention and regulation, but
relatively free market forces.

Most of the modern countries have mixed economy where

decisions are made in marketplace with governments passing laws and framing policies
that regulate overall economy of the nation.

Economic Model: Used to forecast or predict results of various changes in variables.

1. Identify the problem
2. Develop a model based on simplified assumptions.
3. Collect data and test the model.

Societys Technological Possibilities:

Each and every economy has only limited resources and hence should optimize them for
efficient use. By asking questions like what how and for whom they are deciding how to

distribute a limited quantity into unlimited demand. For this we need to address the below
needs:
Inputs- commodities or services that are used to produce goods and services.
These can also be broadly classified in the following:
Land: It includes the natural form of resources like land is required for setting up factories
Labour :it refers to the human time spent on production
Capital: These are the goods produced to produce other goods like machines hammers
etc.
Outputs: They are the various useful goods or services that result from the production
process and will be either further utilized or consumed by the consumer.
The Production-Possibility Frontier: PPF shows various combinations of amounts of two
commodities that could be produced using same fixed total amount of each of the factors
of production. For an economy to increase the quantity of one good produced, production
of the other good must be sacrificed.

Group Learnings:
As a team with diverse nature we came to a consensus that the ultimate goal of economics
is to bridge the gap between scarcity and the rising demand for resources. With the high
level of unemployment, global competition in the market we need to effectively utilize
our resources. While investing we need to identify the dynamics of macro and micro
economics .Economically and socially successful economies have significant
contributions from both the government and the private sectors.