Agenda

Introduction to economics
Definitions of economics and its major modes – macro and micro
economics.
Need and importance of studying economics.
Classical, Neo-classical and modern school of thoughts in economics.
 Economics
Economics is a social science studies how
society chooses to allocate its scarce resources,
which have a alternative uses, to provide goods
and services for present and future consumption.
 Types of economics

Microeconomics: It Focuses on the actions of individuals and

industries, like the dynamics between buyer and sellers, borrowers and
lenders.
Macroeconomics: It takes a much broader view by analyzing the
economic activity of an entire country or the international market place.
 Role of economics in daily life
Economy explain all phenomena's of life for example
Interest rates in your savings, food cost and food resources etc.

Education economics:
It is also called economics of education. It is the study of
economic issues relating to education, including the demand for
education and the financing and provision of education.
 Scarcity of resources
How much to spend on each stage of education (i.e. What to
produce?)

How to provide educational services in way that maximizes its

benefits to society (i.e. how to produce education?) and

Who should have access to each stage of education (i.e. for

whom education is provided?)
 Three decision makers or stakeholders in the
educational system.

i. The society.
ii. The institutions or providers (supplies) of education.
iii. Individual or households (purchasers of education system).
Fundamental problem of economics of
education
The fundamental problem of economics of education
is how the society , institution and the household
make use of limited human and material resources
they have, to best satisfy their unlimited wants for
education.
Need and importance of economics
i. Dealing of shortage of raw material.
ii. How to distribute resources in the society.
iii. Role of government in the economy.
iv. The principle of opportunity cost.
v. Social efficiency.
vi. Forecasting
vii. Knowledge and understanding.
viii.Evaluation.
ix. Behavioral Theory
 School of economic thoughts
Classical
Classical school is regarded as the first school of economic thoughts is
associated with the 18th centaury.
The main idea of the classical school was that markets work best when
they are left alone and that there is nothing but the smallest role for
government.
 Classical theories
Adam Smith theory:
People who acted in their own self-interest produced goods and wealth
that benefited all of the society.
Marxism Theory:
This theory states that capitalism will eventually fail because factory
owners and CEOs exploit labor to generate wealth for themselves.
 Neo-Classical
This is a wide ranging school of idea from which modern economic
theory evolved.

This method is clearly scientific with assumptions hypothesis and

attempts to drive general rules about the firm or consumer.

Neo classical economics assumes that economic agents are rational in

their behavior and that consumers look to maximize utility and firms
look to maximize profits.
 New Classical
New classical macro-economic dates from the 1900s
and is an attempt to explain macro-economic
problems and issues using micro-economic concepts
like rational behavior, and rational expectations.
 Modern School of Thought
Prof. Lionel Robbins defined economics in the following four
fundamental propositions that constitute the basis of the structure of
economic science.

i. Human wants or ends are unlimited

ii. Human wants are different in importance
iii. Resources to fulfil human wants are limited
iv. Resources have alternative use
Human wants or ends are unlimited
Human beings have wants which are unlimited in numbers.
If one want satisfied another grows up.

If wants had been limited, they would have not and all
incentives to economics effort would have ceased.
Human wants are different in importance
Human wants are not of equal importance because
these are uncountable.

Therefore they compel us to choose between more

urgent and less urgent ones.
Resources are Scarce (rare)

To satisfy unlimited wants people have limited

economic resource. These resources are various
types of labor, capital, land and entrepreneurship
used in producing good services.
Resources have alternative use
The limited resources are capable of alternative uses.
As wants are varying in importance, some are more
urgent and other less urgent.

These resources should be used selectively to the most

urgent wants firstly, so choice comes again.