Eco-101

Microeconomics-I
 UNIT-I

Basic Problems of ECONOMICS

MICRO AND MACRO ECONOMICS

NATURE AND SCOPE OF MICRO ECONOMICS

 What is Economics??

 Economics is social science that studies

production, distribution and consumption of goods
and services

 Economics is the study of the allocation of

resources, the choices that are made by
economic agents
Why Economics is called Social Science?

 Subject matter of economics is human being and it studies

human behavior

 Human behavior is unstable, unpredictable

 Different circumstances gives different results

 No uniformity
History of Economics

 Adam Smith used the ideas of French writers to create a thesis on how
economies should work, while Karl Marx and Thomas Malthus expanded on his
work—focusing on how scarcity drives economies.
 Leon Walras and Alfred Marshall used statistics and mathematics to express
economic concepts, such as economies of scale.
 John Maynard Keynes’ economic theories are still used today by the Federal
Reserve to manage monetary policy.
 Most modern economic theories are based on the work of Milton Friedman,
which suggests more capital in the system lessens the need for government
involvement
Adam Smith

 Father of Economics and Father of Capitalism

 He was Scottish Economist, Philosopher,
 He was inspired by French philosopher
 He wrote books:
 ‘The Theory of Moral Sentiments’ (1759)
 ‘Wealth of Nations’ (1776)
 Propounder of Classical School thought of Economics
 He talked about free markets and capitalism
 An economy is a system which attempts to solve
the basic economic problem. There are different
types of economies; household economy, local
economy, national economy and international
economy but all economies face the same problem.
The major economic problems are
(i) what to produce?
(ii) How to produce?
(iii) How much to Produce?
(iv) When to produce and
(v) For whom to produce?
Adam Smith-Father of economics

 THANK YOU