on ere ne ity a =) Gerd Sawer Bam Peet inn (Siew PS wel ah, Poe Plant 74 soe 3 pe Paks ee Uh ae —_- - WHY STUCY ECONOMICS ? ressoeu ——=" WE DO NOT STUDY ECONOMICS FOR ITS OWN SAKE, BUT FOR! THE LIGHT IT SHEDS. = ECONOMICS COVERS: = a) THE LIGHT-BEARING ASPECT. bo THE FRUIT= BEARING ASPECT £ $5 no THE AGE OF CHIVALRY 1S GONE, THAT OF SOPIISTERS , ECONOMISTS AND CALCULATORS HAS SUCCEEDED." = EDMUND BURKE ECONOMICS 1S PART OF BOTH CULTURES, A SUBJECT THAT CAN COMBINE THE ATTRACTIVE FEATU¢ES OF BOTN HUMANITIES AND THE SCIENCES. C.P. SNOW POLITICAL ECONOMY, TIE QUEEN OF SOCIAL SCIENCES, 15 ALSO A GOOD SERVANT THAT WE CAN USE TO PROVIDE THE BASIS FOR CIVILISATION. P. A. SAMUELSON IMPORTANCE OF THE STUDY OF ECONOM= cst ECONOMICS PROVIDES AN ANALYTICAL TOOL OF ECONOMIC REASONING AND THUS ENABLES PERSONS TO BECOME USEFUL AND’ INTELLIGENT, CITIZENS. THE ARGUMENTS IN THIS REGARD ARE? p Economic Considen [> Social Consideration jsemirs te \ewntd19 DEALS WITH PERSONAL FAMILY MATTERS|, Psychological | chro! ” 7 propel TES 4 TOOL FOR POLITICA pgerstons bre&hnologtent ‘i Decisions + Corporate navetion Zygarereheee Joy arp nustnc SOR et eT Eat ete WwW ¥ aa econcule. Oniome arstabuvon ws oration of 4) DEALS WITH SOcTO%g PROBLENSHS » SEP Sea le &) ASSISTS PUBLIC PoLtcy a.TEdh SORA be DECTSTONS Capitalist 5354 6G) — ENLIGHTENS REGARDING THE ECONOMIC SYSTEMS}> Socialist 0 Mined Economy 7) IMPORTANT TOOL FOR, CORFORATE DECISION M.ENG THUS, THE STUDY OF EGONOHICS 1S AN INDISPENSIBLR PRE-REGJISiiS FOR USEFUL AND ENJOYABLE PARTICIPATION IN THE GREAT CONVENSAT:ON. . i) Classical or Wealth Definition (1776) ii) Neo-Classical or Welfare Definition (1890) 441i) Modern or Scarcity Definition (1932) er E Daersions deel * posite Seen on cone to Emvash 9 - ate Produce 2 caopr 9 vies ? = chet Fe predicts 2Cotes peg ak better Bere mes PEO PN Introdue to Economic Analysis = — Reading Assignment I WIAD 38 _ucononTce?, The word "Economics" had been derived from the Greek word "“Oikosnomia" i.e. "Oikos" (a house) and "Nomia" (to manage) which,inefact, meant Managing a household using the Linited funds’ available in the most economical manner possible, Thu: the term "economics" was applied to a frugal use of one'g Limited resource: At present, there is a plethora of definitions of Economics” «. available in the field, Perhaps noneof them is free from + drawbacks/limitations. However, the ordinary definitions 6£ economics runs as follows? (1) Economics is the study of those activities that involve money and exchange transaction, among people. (2) Economics is the study of how men choose to use scarce or limited productive resources (land, labour, and capital) to produce various conmodities and to distribute them to various members of society for their consumption. (3) Economics is the study of how mankind goes about the business of organizing its consumption and production activities, The Scientific Definitions: A~ The Classical Definitions * The early ‘economists, being influenced by this ~ mercantilist's ideologies, had defined economics as a science Of wealth. Adam Smith (1723-1790) the father of Economic Science in his book, "an Enguizy into the nature and cause of wealth of Nations" (1776) had established this wealth definition of Eco, Economics was regarded as the Science which studicd the production and eonsumption of wealth, Wealth is interpreted broadly as in the sense of scarce means and services with different applications to the various wants of human being, John Stuart Mill Looked upon economies a practial science of production and distribution of wealth, rohn S. Mry Y @co. as = precsect Secmnice a prodachim ard AGRE ge eK”, B~ The Noo-Classical, Definitions’ Alfrad Marshall (1842-1924) in his book "Principles of Economics" (1890) defined Economics as a study of Man's action in the ordinary business of life, He shifted the emphasis from "Wealth" to "Welfare! Marshall defined “Political Economy or Economims is a study of mankind in the ordinary business of life, it examines that part of * ptecdtens Arnette —— conch RUGKIn DBRmrb serv nee Gospel J wammen”mest Andividual and social action which isamt closely connected with the attainment ad with the use of material requisites of well-being"./ Prof. A.C, Pigon defined “economics as'a study of economic welfare and economic welfare beng descriledns that. part of welfare which can‘be measured with the help of mone] 4 ~The! Modern Definitions» Prof, L. Robbins in his book "Nature and Significance o£ Economic Sciénce" (1932) initiated an altogether fresh controversy regarding the definition. of Beonomics, "Economics is the Science which studies human behaviour as a relationship between ends and searmemeans which have alternative uses," The fundamental properties involved in the definition are _ (aw) The gnds_(ttuman Wants) are various’ and unlimiteds A Choice is to be made between ends (ia) The means and resources to satisfy those wants are Limited and scarce. (aia) The scarce resources have alternative uses (iv) In order to have best utilisation of resources the ends are to be graded as per their significance, Gxowth Approacht _ Prof. Paul A, Samuclson “has offered a more explicit definition of Economics on the foundation provided by. Prof. Robbins, According to him, "Economics’is the study of how men and Society choose, with or without money, to employ scarce productive resources to produce various commodities over til d_ distribute for consumption, now and in 18 various people “and groups 4 tion of Yanes appro: Prof. J.K. Mehta ‘uho propounded this defind tion argued “ maximum satisfaction" rather completely inconsistent with the maximum o£ human wants. A want is a painful experience so removal of wants means removal of pains and fence procurement of pleasure, So better to minimiso our wants."Soo Views of No~efinitionister There is also a school of thought among the present day geononlets whloh Le strongly epposed to any attumpt at defining or limiting the subject matter of Economics. Prof. Jacob Viner "Economics is what Economists do". Prof. Gunner Myrdal "Such definitions are both unnecessary and undesirable. They are unnecessary, for the one concept which an economist need not define precisely is Economics. No argument can possibly be affected by such a definition, just as no chemist can draw any scientific conclusions from a definition of concept "chemistry". THE ECONOMIZING PROBLEMS IN ECONOMICS: Economies is a social science that studies the problems associated with, or arising out of, human efforts for the production of goods and services (i.e. wealth) in response to man's needs and desires Then wants, which may be many in number, are either dividual in nature (e.g. food, clothing etc.) or collective e.g. need for defence) or a combination of both, However, the wants or ends are limited by our capacity to produce goods and services. Thus there is a need for, choice. One has to choose between the compe ting Wantas his "Gei1e for decisions about division of our available time into work and leisure, (1i) How much of labour time shouldbe devoted to the production of private goods and public goods. In other words we have to allocate our available time between leisure, production of private goods and public goods. The amount and quality of goods and services which can be produced with our available labour time depends on the amount, quality and efficient use of available resources. Most of these resources are capable of being used for alternative purposes, i.e. from the production of different types of goods. A basic problem, therefore, is how to allocate given resources which have alternative uses, to competing ends. (Pull utilization of resources in the best manner). Thus the ends are unlimited and the given resources are_scarce, therefore, the common sense problem of Economi zing.-4- Definition of Mathematical Optimization problem. “The variables of the, economizing problem are instruments, summarizing the choice of a particular allocations, the function to be maximized in the economizing problem is the objective function, summarizing the competing ends, and the constraints of the economizing problem", summarizing the’ sdareity of resources define the sct of instruments satisfying all constraints known as the opportunity set. Mathematically, therefore, the economizing problem is that of selecting instrument from the opportunity ect so as to miximize the objective function". 5 The Modern Govt. has Multiple objective function for the society it represents, The constraints are Economic, social political, administrative and legal. Somé. consumer has to max, his satisfaction from the various goods and constraint is income or money he wants to spend, A producer would'like to maximize the outputfprofit sub to scarce resources like capital land etc. A society is composed of svveral sub-groups or classes ‘and some of them with antagonistic (oppesite) interests. Institutions of af Economy Households: Group or person sharing income for consumption purposes; a typical family is composed ‘of one or more persons Fines : (Private, Public, Joint) producing goods or services for sale to"other firms or to final consumers. Trade Unions? Groups of employees organized to bargain collectively with employers for certain ends. Government ! Political entities which have very important economic functions.