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INTRODUCTION

BQS 1013 :

INTRODUCTION TO ECONOMICS

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Definitions of Economics

Adam Smith !ea"th definition# $Economics is the Sciencethat st%dies &'od%ction ( cons%m&tion of )ea"th#*+isfamo%s ,oo-. $An In/%i' into the Nat%'e and Ca%ses of the!ea"th of Nations* )as &%,"ished in 12#A"f'ed Ma'sha"" !e"fa'e definition# $Economics st%dies

those economic actiities of a socia" man )hich a'econce'ned )ith attainment and %se of mate'ia" 'e/%isites of)e""4,ein5#6ione" Ro,,ins Sca'cit definition#7a%" #A# Sam%e"son 8'o)th o'iented definition# $It ana"ses the costs and ,enefits of im&'oin5 &atte'ns of

'eso%'ce a""ocation#*

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SUB9ECT MATTER O ECONOMICS

Economics if conce'ned )iththe ana"sis ofcons%m&tion. &'od%ction. e;chan5e and dist'i,%tionof )ea"th &"%s the a""ocation of sca'ce 'eso%'cesamon5 com&etin5 %ses#!ith the &%,"ication of 6o'd

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6ORD 9O+N MANARD

+e a&&'oached the economic &'o,"em of choice f'omthe &oint of ie) of societ instead of ie)in5 it f'omthe an5"e of the indiid%a" as done , Ro,,ins andMa'sha""#

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MAIN OCUS O ECONOMICS

!hat 5oods and se'icesneed to ,e &'od%ced andin )hat /%antities!hat methods of &'od%ctiona'e %sed to &'od%ce

these 5oods+o) is the tota" o%t&%t of 5oods and se'ices to ,e

a""ocatedamon5 the mem,e's of societA'e the 'eso%'ces ,ein5 %ti"ied o&tima""!hat a'e the &'o,"ems faced in Inte'nationa"

T'adeTo )hat e;tent sho%"d the 5oe'nmentinte'enein

the )o'-in5 of the ma'-et fo'ces

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BASIC CONCE7TS

Economic and non4economic actiities#Econom its fo%' secto's#8D7. 8N7. Nationa" Income#

Mic'o and Mac'o Economics#Economic &'o,"em !h does it a'iseCent'a" o' ,asic &'o,"em of an econom#!hat to &'od%ce +o) to &'od%ce o' )hom to

&'od%ce

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ECONOMICS

7'of# Ra5na' 'isch of the Os"o Unie'sit dee"o&edthe te'm mic'o ( mac'o economics in 1?33# The

)o'd $mic'o* is de'ied f'om the 8'ee- )o'd.$Mi-'os* meanin5 $sma""* ( $ma-'o* meanin5 "a'5e#Economic theo' is an inte5'ation of mic'o ( mac'o

economics# The a'e the t)o a&&'oaches to st%d theeconomic &'o,"em of choice#

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MICRO ECONOMICS

+o) a'e 'eso%'ces to ,e a""ocated the &'od%ction f5oods ( se'ices+o) a'e 5oods ( se'ices dist'i,%ted

+o) efficient" a'e the 5oods ( se'icesdist'i,%tedAnothe' a'ea )hich mic'o4economics st%dies is

inte'nationa" t'ade# it &'oides a f'ame)o'- to

%nde'stand the need fo' inte'nationa" t'ade.'easons f'o t'ade. 5ains f'om int# t'ade (dete'mination of the te'ms of t'ade#

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4ECONOMICS

7'oides a ,ette' %nde'standin5 of the )o'-in5 ofdecision4ma-in5 %nits in the econom#7'oides too"s fo' e;aminin5 the a&&'o&'iateness

of economic &o"icies#+e"&s to e;amine ( s%55est conditions fo' )e"fa'e

o&timiations#+e"&f%" in efficient a""ocation of sca'ce 'eso%'ces#+e"&f%" in %nde'standin5 inte'nationa" t'ade#7'oides a ,asis fo' ma-in5 conditiona"

&'edictions#+e"&f%" in fo'm%"ation of Mode"s ( %sin5 them#

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ECONOMIC 7ROB6EMS

7'o,"em of A""ocation of Reso%'ces#7'o,"em of %"" and Efficient %ti"iation of

Reso%'ces#

7'o,"em of Economic 8'o)th#The conce&t of O&&o't%nit cost#

6eft)itch sas. =O&&o't%nit cost of a &a'tic%"a'&'od%ct is the a"%e of the fo'e5one a"te'natie

&'od%ct that 'eso%'ces %sed in its &'od%ction co%"dhae &'od%ced#>

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CURFE

77C is a c%'e )hich sho)s a"" &ossi,"ecom,inations of an t)o 5oods &'od%cedsim%"taneo%s" , an econom d%'in5 a s&ecific

&e'iod )ith 5ien 'eso%'ces and techno"o5#Ass%m&tions i The amo%nt of &'od%ctie

'eso%'ces is fi;ed. ii The'e is no chan5e intechno"o5. iii A"" the &'od%ctie 'eso%'ces a'e

f%"" em&"oed and i A"" 'eso%'ces a'e not e/%a""efficient in the &'od%ction of a"" 5oods#

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C+ARACTERISTICS O 77C

It s"o&es do)n)a'ds to 'i5ht#It is concae to the &oint of o'i5in#Th'ee sit%ations of 77C %nde'4%ti"iation. fai' o'

o&tim%m %ti"iation and f%""4%ti"iation of'eso%'ces 5'o)th o' dee"o&ment4economics#The concait of the c%'e 'ef"ects the o&e'ation of

the "a) of inc'easin5 ma'5ina" o&&o't%nit cost#

It is a"so -no)n as t'ansfo'mation c%'e asmoement a"on5 it indicates t'ansfo'mation of onecommodit into the othe' , die'tin5 'eso%'ces#

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CURFE

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ECONOMIC SSTEMS

An economic sstems is the socia" o'5anismth'o%5h )hich &eo&"e )o'- and ea'n thei' "iin5 tosatisf thei' )ants#It stands fo' the tota"it of economic "ife of a

comm%nit# Comm%nities a'e 5'o%&ed intonations# Diffe'ent nations fo""o) diffe'ent &o"itica"sstems#Ca&ita"ism f'ee ente'&'ise econom o' "aisse

fai'e "eae %s a"one#Socia"ism Command o' 5oe'nment economiesMi;ed economies#

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e) ,asicsGG

7'od%ction T'ansfo'mation of in&%t into o%t&%tis ca""ed $7'od%ction* in Economics#

acto's of 7'od%ction 6and. "a,o'. ca&ita" and

o'5aniation o' ent'e&'ene%'shiCons%m&tion#

Inestments#

Ca&ita" fo'mation H 7'od%ction Cons%m&tion#Uti"it !ant satisfin5 &o)e' of a commodit is

ca""ed %ti"it#

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Is Economics a Science

=Science is a sstematic st%d of -no)"ed5e )hicht'aces the 'e"ationshi& ,et)een ca%se and effect#>

eat%'es of Science Sstematied St%d. Ca%se andeffect 'e"ationshi&. Unie'sa" 6a)s. E;&e'iments.Sca"e of Meas%'ement#

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Cons%me'*s E/%i"i,'i%m

It 'efe's to a sit%ation )he'ein the cons%me' 5etsma;im%m satisfaction o%t of his sca'ce 'eso%'ces.i#e# month" income#

Ass%m&tions Cons%me' is 'ationa". %ti"it can ,emeas%'ed ca'dina"". ma'5ina" %ti"it of mone'emains constant. Income of the cons%me' and the&'ice of the commodit 'emains fi;ed. 8oods a'e

neithe' com&"ementa' no' s%,stit%tes fo' oneanothe'. Taste &'efe'ence does not chan5e#

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7'od%ce'*s E/%i"i,'i%m

E/%i"i,'i%m indicates a sit%ation o' a &oint of 'est#It th%s. 'efe's to a sta5e of no chan5e# It si5nifies asit%ation in )hich the'e is com&"ete ad@%stment ofthe a'io%s fo'ces o&e'atin5 the'e# The'e is no

ind%cement o' %'5e to chan5e# It is an idea" state#A 7'od%ce' o' fi'm is said to ,e in e/%i"i,'i%m

)hen he is &'od%cin5 desi'ed /%antit of o%t&%t)ith the "east &ossi,"e cost o' )ith the 5ien'eso%'ces. he is &'od%cin5 ma;im%m &ossi,"eo%t&%t#7'od%ce'*s e/%i"i,'i%m is the &oint at )hich a

&'od%ce' 5ets ma;im%m &'ofita,i"it#

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!hat is economics

!h does the const'%ction ind%st' dese'e to haeits o)n ,'anch f'om the 5ene'a" economics