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An Introduction to the Course: • COURSE CODE : HU 441 • CREDIT HOURS : 2-0 • COURSE CONSISTS OF THE FOLLOWING MAIN TOPICS:
1. 2. 3. 4. 5. Introduction to Economics/ Fundamental Economics Concepts/ Supply & Demand Accounting/ Cost Benefit Ratios/ Interpretation of Financial Statements Types of Markets and Forecasting Industrial Organization Site Selection and Factory Layout
ASSESMENT OF SESSION WORK:
1. 2. 3. 4. Quizzes Assignments OHT END TERM : : : : 6–8 2 2 1
INTRODUCTION TO ECONOMICS -WHAT IS ECONOMICS? -WHAT COMES TO MIND WHEN YOU THINK OF ECONOMICS? -WHAT DOES ECONOMICS DEAL WITH? 2 .
Ultimate objective of Economics is to make a feasible decision which solves the problem of limited resources to meet the need of humans. we have to choose the best solution --. we try to spend them in such a way so as to get maximum satisfaction/ benefit --.we are therefore constantly economizing on time and money.i. Sum total of economic activity is an ECONOMIC SYSTEM.WHAT IS ECONOMICS? WHAT DOES IT DEAL WITH? Act of earning money and at the same time producing goods and services required by others is called an Economic Activity. How we regulate our spending Organization involved in manufacture of goods we purchase Principles that govern the pricing of goods we purchase. It is concerned with HOW people make decisions in a world of scarcity. 3 .. etc. i. which is important to understand as it effects our material life.e. Also TIME & MONEY are limited.e. ECONOMICS is the study of making choices.
WHAT IS ECONOMICS ? We can say that: ECONOMICS is the study of how individuals and societies choose to use the scarce resources that nature (and previous generations) have provided. when added up. The choices that people make. Basically it is a study of how people make choices. It is concerned with HOW people make decisions in a world of scarcity. Economics is a behavioral. 4 . The key word in the above definition is choose. translate into societal choices. or social science.
with alternate uses’. distribution and consumption of wealth in the human society’. Some define it as ‘the science which deals with the nature. 5 4. Economics is some times defined as a ‘science of wealth’. 3. Another definition given to Economics is ‘Economics is a science which studies human behavior as a relationship between ‘ends’ and ‘scarce means’. production and distribution of wealth’. The Economists’ Dictionary of Economics defines Economics as ‘the study of the production.NOW LETS LOOK AT SOME OF THE DEFINITIONS OF ECONOMICS DIFFERENT WRITERS HAVE GIVEN DIFFERENT DEFINITIONS OF THE SUBJECT OF ECONOMICS: 1. 2. .
ECONOMICS is sometimes called the study of scarcity because an economic activity would not exist if scarcity did not force people to make choices. . and services to satisfy the needs of individuals. Scarcity means that there are not enough. A decision of consuming more of a good or service will lessen the consumption of others because of limited resources. or there can never be enough goods. People must choose what they desire for. The concept of scarcity is important to the definition of ECONOMICS because scarcity forces people to choose how they will use their limited resources in an attempt to satisfy their unlimited wants and desires. Scarcity requires choice. They will either be satisfied or otherwise. 3. 2. families and societies.SCARCITY 1. 6 4.
not exact. 7 . which are statements that. the Economist is able to formulate Economic Laws. and involves complex relationships and human behavior. these laws are less precise or exact than the physical sciences. Very accurate looking economic laws are still only approximate. certain effects are likely to follow. Thus. given certain causes in the economic sphere. the first principle to understand is that ECONOMIC LAWS can not be rigid or permanent. THUS. Economic Laws hold good on the average and NOT in every particular case. ARE THEY EXACT OR PRECISE LAWS? Since Economics is considered a social science. ECONOMICS IS NOT AN EXACT SCIENCE.LAWS OF ECONOMICS HOW ARE THEY MADE? When the working of ECONOMIC SYSTEM shows uniformities of behavior or action.
Study of economics helps us to decide which of the several alternatives to choose.WHY DO WE STUDY ECONOMICS ? WHAT ARE ITS USES? 1. The ECONOMIC SYSTEM is important to understand as it effects our material life. firms.Principles that govern the prices of goods we buy. Gives us insight into forces underlying the working of an economic system.How we regulate our spending . Enables consumers. choose wisely and avoid many pitfalls in arranging our economic affairs.e. etc. .Organization involved in manufacture of goods we purchase . workers. 2. This helps us in framing policies needed for the welfare of the people. capitalists etc to make their decisions more wisely/ intelligently 4. 3. i. 8 .
TYPES OF ECONOMICS MICROCECONOMIC MACROECONOMICS DIFFERENCE BETWEEN THE TWO? 9 .
10 . business firms. etc. MACRO-ECONOMICS: a) b) c) d) Looks at the economy as a whole: Macro –economics examines the factors that determine national output. or national products.Economics is divided into TWO major types: 1. etc. how much to charge Household’s choices about what & how much to buy.e. i. Firm’s choice about what to produce. 2. households (consumers). etc. Deals with National Income Looks at the overall price level and how quickly/ slowly it is rising/ falling Deals with the aggregate employment & un-employment. MICRO-ECONOMIC: Deals with: a) b) c) Functioning of individual industries & behavior of individual economic decision making units.
shelter are the BASIC WANTS. etc. thirst. He lives. HUMAN WANTS have the following CHARACTERISTICS: Human wants are unlimited – one is satisfied. education. Human Wants compete with each other – A person satisfies the most pressing want first. etc. Wants can recur – hunger. HUMAN WANTS: These are the requirements/ needs of mankind. others appear Individually wants are satiable – becomes less and less pressing as it is more and more satisfied. recreation. travel. clothing.e. i.FUNDAMENTAL ECONOMIC CONCEPTS/ TERMS: We need to understand some of the fundamental economic concepts/ their meanings before proceeding further into the subject: 1. Same want can have alternate method of satisfaction 11 . food. by the satisfaction of a large number of different wants. then comes medical.
shelter.Value of utility is measured in some medium of exchange called ‘price’. i.e. . clothing etc (b) PRODUCER GOODS or CAPITAL GOODS: Used for production of other goods.FREE GOODS: Goods that are not scarce.e.e. we are ready to pay the highest price.. clothing etc. i. . food.e. continued 2.e.An item which does not have utility can not be called a ‘good’. (Scarce means not enough compared to the want it has to satisfy) 12 4.FUNDAMENTAL ECONOMIC CONCEPTS …. . GOODS AND SERVICES: Any thing that satisfies a Human want is a GOOD. sunshine . are called economic goods. food. i.ECONOMIC GOODS: All goods that possess ‘utility’ and are also scarce. Greatest utility.GOODS are of two types:(a) CONSUMER GOODS: Satisfy want directly.SERVICES also satisfy Human Want. 3. i. raw material etc. Plenty for every body. UTILITY: The ‘power’ of a good to satisfy a human want is called ‘utility’. FREE GOODS AND ECONOMIC GOODS: . . . air. i.
roads. can change hands. etc.Should be transferable also i. i. community..To be of value. . a good must be scarce and possess utility also. state farms.e. minerals. owned by society. mountains. .Under wealth we include all goods which possess utility and are also scarce. government etc. seas. etc. .We can that ‘ free goods’.e. (e) International Wealth: Available to whole world. 13 . while ‘economic goods’ possess value. .e. 6.FUNDAMENTAL ECONOMIC CONCEPTS …. oceans. etc.When value is expressed in terms of money. is called its Value. WEALTH: Economic goods are also called ‘wealth’ . possess only utility. railways. continued 5. (c) Social Wealth: Also called Public wealth. parks. it is called ‘price’. i. VALUE AND PRICE: The power of a good to command other goods or services in exchange for it. KINDS OF WEALTH: (a) Individual Wealth: Belongs to an individual (b) Personal Wealth: Individuals capacity or skill to earn money.. (d) National Wealth: Includes rivers.
. 9. continued 6. INVESTMENT: In actual sense. (a) GROSS INCOME: Total money received by the recipient of income. INVESTMENT occurs when ‘expenditure is done in producers goods. (b) NET INCOME: Income remaining after deducting from Gross Income various cost incurred in earning that income. TRANSFER PAYMENTS: Pensions. 8. he is investing (increase of capital goods in a country). . etc.. when one purchases a new machine in the market or constructs a factory 14 building. They come under ‘Transfer Payments’ 7. which are purchased for the first time. SAVINGS: That part of income which is not spent on consumer’s good. CONSUMPTION: Consumption can be defined as incurring expenditure (or spending of income) for the purchase of ‘consumer goods’ .FUNDAMENTAL ECONOMIC CONCEPTS …. it is regarded as having been consumed. etc benefits are not income in the actual sense. as only then PRODUCTION is stimulated’.Buying of shares in a newly floated company would be investment . INCOME AND TRANSFER PAYMENTS: INCOME: Only those payments are income which are received in return for services rendered. Could be rent of house. interest on deposits.Act of investment is which leads to the increase of capital of the country.Similarly.Once the goods have been purchase by the final consumer. . un-employments.
MARGINALCOST CONCEPT: .. MARGINAL: Terms like ‘marginal utility’ or ‘marginal consumption’ etc. (Law of Diminishing Marginal Utility) . or the point where we buy our last unit of any commodity. MAGINAL UTILITY: The additional utility added to the total utility by the last item consumed/ purchase is called the Marginal Utility.Marginal cost is one of the key concepts of economics. MARGINAL REVENUE OR MARGINAL COST: Refers to additional revenue or costs.Marginal cost denotes the extra or additional cost of producing an extra unit of output . depending upon the type of service/ production it refers to. .FUNDAMENTAL ECONOMIC CONCEPTS …. the smaller is the increase in utility of each additional item.This is the point where further consumption or sale ends.A marginal cost could be quite low or quite high also..And this unit/ point where we buy our last item is called MARGINAL CONSUMPTION. .and the unit we buy at this stage is said to possess MARGINAL UTILITY. . that will result from increasing the output of a system by one or more units. . 11.the larger the supply of an item. continued 10. are used to indicate the last or final unit where either UTILITY or CONSUMPTION or SALE ends. 15 .
A perfect monopoly exists when a UNIQUE product or service is available from only a single vendor and that vendor can prevent entry of other vendors into the market. and there is no restriction against additional vendors entering the market. Freedom for both buyer and vendor.FUNDAMENTAL ECONOMIC CONCEPTS …. 13. continued 12. COMPETITION: Most economic principles are formed for situations where we have ‘perfect competition’ (between sellers and between buyers) PERFECT COMPETETION occurs when any given product is supplied by a large number of suppliers/ vendors.. MONOPOLY: It is the opposite of competition. 16 .
End of this lecture 17 .
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