elassMate

Date DG1oS|a
Page

ntsoducdion to fConomiCE
fahe Dt conomicc Adam Smith (pao4Ke gRPRCSK R (moal phlasophu)
An enquiru nho the natuie 0 he wealth oc the natione
14c0)

Enaland 4ave fiít Concept o Multinational CorpDsatiDn

ast Anda cosmpany id 18 th century)
"AheAnarchu wiliam Dalrumple
100 2 qudy of MICIO £tO-
Otoncepi Of tolonialism 0Omics
NGLAND.
NGLAND.
onceph of MulHinational corporaion
.Concepl D Capitalicm

DE FINIIDN OF ECONOMICS
cOnomi.cs issCATte
hes sBudy of human behYiOur as a lation behoeen_
ho ends and,mea0s A achieye the ends

RELARLONSHP BETOEEN CCONOMICS kGCARCITY

Econonic houa
theoty itaches u allotaie ceavce vesbucesin anene
nmannes auuh that the ditNant 0ttas 0f develapsn.ent can be pilorHiged so
as ko maximise welfase.

DEFINITLON OF SCARCITY
SCarciHy i the non-aNailabiihi D TSOureeA even at 3ei0 psice. Scarcih
lis Ahe lack t£ supply o e sources in Race O Nigh dernand kar it.

DEINIOON OF MICROECONOMICS
Microeconomics ic she study_b he smallect unit og ecnnomic entihs.4
a eal wHh one buuen one sellehOne Mackel, one fum ONe industsu, one
gaodprice Der unit Dt a gond ete

fOur fackrs of pToduchon

Land
Labour achxy sushem
EoAepieneur
PEMUVAVO tapital

MlCROE CONO MIS7 LIOnel Robblnc (1160) we studu how humans takes
decigions
 classmate
Dafe
Page

TOPIc1 NTRODUCAIONo ceONOMIC tONCEPt OF PRODUCTION POSSBLITY CUKUE

Gl ohy is the Centfal ptoblem.of an economyla,the ptoblemofchoice
An Searcihy of eDuces imply lack D Supply 0 sAouCes 1n Race 0
hiah demand for it. Sinte Ahese is Scasih o sexouTres 0 face o Contidesable
demand foA it hence 1e40ureex need obe efioienhla b utilagd to Keap-he
Maximum benetit, Ahis imples that umited KMOurees have o be allocaled
Iptenentanea of econDmie developtient such 4hat wtlfano ik maxim12td.hus
he centsal pro blem ot an econoy i houa choxe Among the dlfehant
avenues of development, uiheN TLOuCes need k be allocated to as
Lmaximice saelfaa. hus, the cenaxal prouler of an eeonomyth pToblenm 0
choice, L

Lhe fictent allocakon oe limiied xeAbCes dodifteAat avenues of

development s0 ab da Makimice weltao t¢ KAGn a opHmal oilocakonof
CADurcOA D ophinmiaahon of seÁOUrOeA,

Reasons for the eenkfal probler 0f_an_economu

u) Unlimited wants
) Limited xEtousces ka fulfil Ahe 1oaD feahurea ehatachericics 0£ Resources
AI) ReLburces havingalHeanahve uses
itian
Aspecis oOf the problem 0fchoice
what ko MOduce.
) How pIOduce
DFoY uwhom o pr0duce

Li) hat k píoduce Lchoice of qo0d o be prOduced)

he ww probem Yelaied ho dhat Aype of q0d bt Oduced n an

ecOnOMyand in uhat quantity It is be p10duced. N the CounHL in

Loastime.sHuahon, H should be prOducing 101e Ams ANA ammunihon atd
heconoms
e is inv peacekiune cituakonuit should be pYiduciog moe D conguMer
aoods which would contribul bete shandand ofliving D Ah peaplo o
Ahe eronDmu
 Pege

UHouo o of technique of poduchion)

ptoduce (choice
Ho0 2 piOduce 1elates o Ahe choire ot
Aechnique D pi0duchon og
econonohether it should he.0 lahour Ilit
g0tedk aid serviceA t0 4n
he econory is 1ecs Populan
OYCApiBal inlensve Aechnique ot roduchon, df
and has advanctd seteanch and developsient (aciutyutOU Aloo. Capiial
but 1 he etohofny
ensive oh lechooloqu bated Aechniquo of pxoduchon
enidowed Oh noha manpveh iE should Olbo lab6ur 0enciVe echnlque

O poduckon, h a

D For uhom k produce disiibuton of produred aoods and seices)

and setVIeL 0
ms Js elaled ko. the choice o dielihuho Of 200ds
Andividuol
economy. "hee Qh hoo hupes tf disheibuton (o) Peronal/
PEY
neoeCpita Ane
disbuhon which 10MplueA how much ot Aho produced qoodsand ServiCes

uau be disitibuled arnong each individual i an econbmy ) funchafAl O

yow
fackoral diskibuton.,1ohich implics reax Ahe Gx0C Domesic. Prtuct [ADO
Vue land, labour,
D4 an economu i dishubuled among tho fa this DA produchion
capital and entiepmeneurship.

anaaiula1o1osl8
DIFFERENT YPES OF ECONDMy

Capitalist economy
Socialist Pconomy
2 Mixed conomyIwdia tius of it kind.
ne eyoluion of a socialist eeonomy e he agtehomah 0 a Clasc siugale Aloinq

an imperialistic rule.

POSICIVE AND NORMAfiVE SAAN EMENTS IN ECONOMICS

POSITVESAMEMENTS
Positive slatements in CconomiesQN0 he Dnes thal 1Mply tohat has actual
happened 1olth respecA o.ecOfNomie evenK. 1hece stalement are baed on yeal events

or Ciicumstances in an econonie sysiem. SeVen

Ga i) ndia has nDt achieved 1D0o litetacy atles ko0 decades ot independance
i ndia'k hrallh.infiaseructure invealment hod been perciciently toul a a
peicentaae of GDP.
 classMate
Date
Pao

ii) Gsf collection had been perpeBually high ove 4 laKh Ciore
0 Xupee
Since Decembeh Q0A0

NORMAMIVE StAREMENTS
Nortnahve stalemeng in £conomtes imply tohat hould happ.en tn uh at is
Ought t be deally in aneconomic custem
a. i) Supetvisory boatd has be itHroduced overCee tax evasion.
i)Andia hould have achieved i001, literacu ottin &decades of
Adependane
i) Anaia should gean up health ots0MA infrastructure invesi ment rom
next budgei.

DIFFERENT ECONOMIC SYSSEMG

Capitatict Fsee MaKet CconomuLaissez fadne sustem

i i) e pTDduction wAtt ane Med by pTivali ivdlviduals [capikaisk) entrepre-
Meurs) A V
e pxice D he qoods aMd sehvices an detemied oy fnee maruet
rceA Gf demand and supplu.
N Ihe economic actvhes an ldehlaken wHth the Mohve o pi0A
maxiMigahDu.
A ocialist feonow
Lij oductisn unilk ah Dad b4 the goveMMt stEtah.
0friceso 4o0ds and ceavices ane dttcmined ey tho 40vnMani.
LiDTe tuonomic activities ane disecitd dowandi utlfaM maximizatinm

nMixed £conomy
to-txislence of pivali and pullc lqwn) oaweadhip o4_productiox units
LDPrices o esential goods ahe deteimined by the ovm. pices Bf ail othe
400ds ae detrmingd hy he kNces o deMand and Aupply
The wttive of econole achivities an b0t P10-fit Md wolfahe Maximigabon.
 SOME GRAPHICAL CONCEPTS 8

opehathon8
Chief
ahe a DfAhe
ist quadsaut
ALL POSINE MRexDeconomic vana

CASE PosInIVELY SLOPeD LINES CURVES

due a inCTease in X vatlabla if y Naluas als0 dependan
Vanabla2
indepenaant
Vayialb
inCreasea and vice- VeAsa we obtained a pocitively functon af
dependant upm)
wwlsloped stsaight ine eurve

Case Ala) t duu b mchease M Values of X variable at A constant

Tal ho values 0 vanable algo increaue at a constant
Tau Oe sbtain a positively eloped shaight line.
upuoand slopina)
SlopeX YAX AY
5h:52 102-1-1t0-S5
5 3153-9-1s-105
51 5 4 20 14-31a0 1S 5

5/1-5S 25 S-4 a5-205

 alssnate
Date11/0s1
Poge

Case 16) PosITIVELY SLOPED CONCAVE CURVE

At due h ineftase in valus DA X A 0 Constant 1ate Y Malues 10C1ease
A an increaing Kale. 0e 0btain an upuand sloping.concave eu

LA XYAX AYSlope7

10 5 5/15
3 20 10 10110
90 9.01 920
80 40

Slope= AYA Aalm4

A Cons he euTve
making ita
Conave CUVe

stiulln
Case 1lc) Due y incYease inx at_a ConstanE Tate Y inceases At a_
wdecreasing ale Ahen we Dbtain a POSInIVELYSLORED CONVEx

AX AY Slope
10
90 10 10
6
30
3
 Siope Y

es 1endering tho
poxitively sloped cutye
a sconvex

12

Tto

4 S

CASE 8 NEGAVELY SLOPPD OR DOONWARD SLOPING CU RVEC/LINEC

Isa, we Obtain
f due increase in X Y values decrease br viceVe
hegativelysloped o doonwasd sloping lineijeurve
at a
Casea): Ne due incwase in X at Costant ate)decreases
Constant Tale ue obtain a neaah vely sloped shraight linc.

x AX AY Slope
1 SD
-lo 10
3 30 lo
90 1D
S 10 -10 lo
 elassmate
Date
Page

AytCont.
slope Const.eve
A ConSA

Yendering the line to be

line.
neqahvely sloped Siaight

constant Tate Y values decIease

Case a6): due 0cKease in X ata
Ot An inc1Casing Tate, we aet a negahively slope concave ho_ oriqin
CuXYe

X YAX Y Slope=
1 20
hin 18
13 -S
6 6

20
AY At-ve)-ve) Aes
AX Const

Tendeing e the cuTYO o be

93 13
neqah vely slope concave o oniain.
 Date 1210iT
Page

and dY
at to A Constant Xate
due A jocrease in X values
Case l e )
we obtain a
dowAwand sloping
\ate,
decreases at a decxeanng
tonvex to O1qin CuYve

YAx AY Slope
40
80 10 l0
8 8
H -5
1

ttO
Slope AYV) Fvey
AX onS
YA MA Y
92 30
NENdeiing the cutYe
be neg.abvely-sloped tonvex
13
oniain.

PRODUCTIONPOSSIBILITY CURVE (PRODUCTLDN POSS1BILIY PRONNER)

PRODUCTION POSSIBILICY CURVEe DEP

Produclion PoscibitityCuTve k the lacus of the poins showing_ditfexent
combinaions of qoods Xand L piDducedby tulest utiltgation of-he available
NeSDurces 10 An econ.omy.
Since all the points 0n Ahe Ppc Shbuo di pfeent cOMblnations Df 4oods x andL
pxaducedby Aullesi uilig.ation.of ihe fixed Nesoureesog the econom.hente it
acts ire a boundars ll which p1OduclionOf the Auwo qools is poss1ble or it nas
Ahe prOduclon capacity of an econ.onny, gien. H Alxed TesourcoA are fullg
oxhausted. Hen.ce Ahe pioduciiol possiblity eurve 1 Qlso khoun as the Produchon
fossibility fxontier LeRE). hus"any poist on Hhe tte den.otes production of
X a0d Y by ullest exhaustion Df resources
A,B
) any point outsnde [heyond the YPe lenDies pxoduction ic Abt pocsible.[M. N
 Date
Page

Ii)anyintide the PPe denoies undecutilaation/wasta ge IuneonployMient Df

lhsouces u,N)

ASSUMPCIONS OP THE PPC

only 10o Qpods X and are pioduced n an eton.omy
he wo g0ods are produced bu fullest Utizakinn Df the countKY's2l
1 availablo resources
CiMechnology1amains fixed during he time og n analuis.
he resources ave pecialized for the p10duction_o each of the hoo gpods

PROPER1eS 0P THE PPC

U PPO is douonuard soping

Mathe MAtical ReasDA AC pxOductio0 Df_00e apod re q0od X lncreases,DíDduction
Df goDd Ydecxeases.Ihus.since increase in XprDduction is
esulting in Sacrifici0g px0duction,the PPO ie_douontootd sloping.

fcomomic Reasan : his is based on Ahe fact that esourees Are ixed and ase {ully
ii bin oHilieed/such thAt 2s X productibn 'lencredsed,t is done b4
1oHhotdtoing 12t0uTCestom p10duction op Hence produion falls.
 Ddre
Page

pOducHion
uD PPO Is Concave to origin at A
constant 1ate
Ac x broduction iQC1easeA
IaHne matical
Reason: that h e shope
such
t
deereases an ioreasinq xate he PPe
10creases along
AY 1nCTeate
Marginal Rate of AransforMation) AX Constant

tom legt tight, making it concave to Drigin.

eSouices kom
pEDduckion
As is lncreased y oilhdrauoing
Economic Reason nich dre spectalized
for
p10duchionDf Y,he go 1esourceA
incteasing_amount each ime, o
ineiease_X
IDIDduction are used by
(hus Y_prbducdion decreases b at 10reasing Nate,base
pioduction by 4 unit.
recources are specialized for he production D each of Ahehoo
0n Ahe {act thai
gpods ptDduced in the economy.

Hlos|a1
Slope [mRT) 0 PPe

i indiy Ldik Axconti

inereases aloug urve PP_
ds

gl.Whatis Marginal RaBe of f%ansformation Use a hypothetical deice schedule to

analyse the behaviour 0f the MRT?

Ans Marairal Rale o kanformation 1k he nate at ünich Y producaioo L

Sacielced duc to one mOre unt DE X piDduetibn or +he rate at Onich Xapod
Gets dansformed inko an Additional
u n i t of X good,

Mathematicaly, MR1 IS he slope of Abe PPe such hat

MR AY A henceMRA in creates along the Ppa,Makin9
hence
AX Contt.

ECONeaYe orqin.
 clussmate
0afe
Parge

Hypothetical Schedule

20
19
16 3 3
3

PPe is downwatd sloping

oM the schedule above,MRT is negahivey D
PPe increates it
and since the aksolute values De the slope [MRn) D
enders Ahe curve DMave oriqin

the Curve2
Aransformation
03Whyis the PPealso knoun as

at which YY
Ans Since the roductina Focihilits CurvL shous the Mate
diverking
DMmodity.Is Avansformed into one more unit O X Commodiky by
also ealled the
YesDurcesfrom_ produclion 6 Yto X,hence the PPe is
Aanstormahion CurY

1810s121lOPPORTUNIYcOST
in tts
he opportunity cosE 0 a resDuTCe is the cost 0 the eDuTce
nex best aHeanahve use.

MARGINAL DPPORTUNITY COLT B

MOe i the Tale at which 0ne aood lc sacrLficed fa) the_production
ofonc mDhe untt o4 g00d. anDthe

Mathematically, Mo=MRT Sope op Hhe PPe

MoC AY
AX

Along the PPC,as X production Mreasea ky Aunit each time Y_pxoduchion

decreases ot an increCeing rate, hus MDa also increasea from lett
iaht along Ahe Ppe.
 SHIPTS AND THE PPe
ROTARION OF the p10ducion
oard Ixihilwdid if
APPO K Suppostd o shitt ouB
for both 400ds

4n economy increhses,due
i g4
Capatity.of
(a)1ncrease in 1e40ur.ces
()M Advancem.ent o ethnoog

Ho shiei iniand/lettwatd i
the [email protected] a
A_TrCRSupposed
4L Rtonomy decveares for both ao0ds due F1g
t) Decrease In telouKces
L deini
e)Dhsolence o technoloay'nbzi

Fig )

ia 1a)

YA
 clsssmate
Date 1910 2
Poge

the nCTAaSe in_KeLOuree[advanement bf Aeehn.ploqy Aake ploce in favour

Dniy
Of ap0d X and A04 qo0d Y, Ahen the PPe ol otate at point P and
hecurve wil chiet alonq the y-aXisonly AromfP 4o PP

On Ahe 0thea hand,i Ahere is 0bsolence D Aechnoloayof pxOducionO

decreasee
qpod X only br wce n yesDurees speciatiaed for Ahe produciionofapod X
henthe PPe wlu cotate eft ward at point Psuch that he neo PPe is

p
PP

there is increate in vesouree spetialiged for productinn Of goodDaly

and technological Qdvancem.e0t AaKes place pnls in favour 0 qD0d Y then
PPe oll rotate putoard at point P_such that neo PPe is PP.

>Onthe othe hand if there is obsolenee og iechnnlogy 0£_DroduelionOt g0od

Doly or decrease in xeADurCe specialized for production o apod then the
PPe oillrotaBe lettoard inward at ÞDint P Such that the new Pe is

h nt
 elAsSMALe
Date
Page

94A_etonomiesproduce onls on the PPebefend or Tttute the iStalement With

YAsonhe
Ans he statemend is re{uled. i s because none ofthe econom1e in the
Drld Iable Ao produce commodities viy ihe eullech exploitaion.og Hs
sOuCes.due lo. lack b Hechoical knoo.hoio dearih og invesiment,and
enronanentalconeerne suMch that the countries end up producing the actual
evel of Dutput which isinside the 9Pe and each Ane potential
eannot
w)
evel o 0utput on the PRe. Ne its is a developed economy he poift o
actual output wil be closer AD the PPe whereas, i it 1S a les
lu
developed economu with aeaden unemplourn.ent he actual leVel Df output
will be much incide the PRe

ADohential level of OUtput)

J u d

Achual level o oudput

09 Massive unemployan ent shileis PPC Ho the lefh. Dejend or TAute

he state menE With
12aLon Ugeidiagcam. a nr
Ans he sialemenk is Te{uted. inkk
Aue o ihe fact hat ue unenployment 0r-
undenufiligation of eSDurces lk
Shouifn_bja point i0Slde the PPe As there 1s
no decrease o resOureeA Impied by
unemploument hence
undergpinq any shift, Henee. rnassive unemploument is shouonPPe is not
much insido the PPe by_a point
 clAsSMATLe

Date
Page

03.mmigraion_of_South East Asians Ho Eu.rope in_posA World War shifk the PPe
Comment.

Ang: Ammiqgr.aion 0 South 2ast Astans o Europe ineLASed px0duclive Sources

ofthe uTOpean nations, thereby_increacing their production eapacthy.
Ahis eLuH n riahiward shift of the PPe

Q4. Huge land loss as a sesult 0f sunanic Of &004 in he Andaman and Nicobar
decreased_produciive e&Our.ces to_a large ekient Analyse is impacd on the PPe.

An LOss DAland esource vesuHed 1n_sharp_decr ase inAhe produckion Capacits

ofHhe islands.
his wll esuH ia letiward Shifi of the PPe.

P
 Date
Pege

increase in e prodyeion
resulhed in massive
95Green Revolutionin 196sin Andia chiet industrial a00d
0wheat,at the time when iron and
sieel was indias
Analuse the impack on the PPe.

has sharpls 1nCreastd ne prDduction of

Ang Green Revoluion of 1a68
neat but ixon and sieel produ.ction remaintd unatfecie
owads ne 0xi
B Ahis uol Tesut in riahiward rotation of ihe pPa
ahouainqoamount o heat.

X WHEA
i Y1RON KSERL

ecComputerisation_o Government depariments uwilimpatt the ePe. Comme

Anc Compuierisalton will immediately incxzase he produciiyitu of Ahe

depanmens therebs incrtasina their producdion capacHs
his tuil shiet the PPe rigniward
 clAsSMALe
Date
Page

93.Large sCale purchase_of capitalgoDds by the UAE, by sellinq oil impads the PP
Comment

AnS Purchase Df capilal qpods gives boost 10 the produclion Capacity ofihe
UAE
0 hic ol be choun by a righhoard shigi of ihe P P

uib

it

98GOVernmentof India has launched £mployment Generation Proarammes Llike

MGNREGA) as a_ patt of poverk alleviation schemes. £xNainits R impact on Ahe
PP

Ans £mployment guaraniee pYDgxammes generate employmeH B previously

unemployed people
hepoininsidePPe toilAhus move H0waYds Ahe PRe choiding fulles
uAiliaalion o4_resource
 Date
Page

94.Analuse the impact of the followinq_on ihe PP

a) Beii bachao Btt Padhao Campatgn
o Opetation Andradhanush_(Universal Ammunigation rogram
Opening of 10 news AlLMs LAILAndia nctitute 0g Medical Sciences)
LdOpeninq 04 18s and IMs
e) Suateh bharat Abhiydan.
.Atmanirbhar Bharat(MaKein Andia eampaign)
Ans)he compaign aims at_healhcane and education o grl ehild 0Ahe
backATd avtas. hus. i t has a long-icrm_impact in creaiing a neaihy

Halented vesource unich oill increase Ahe production capaciy of the economy.
hough here ts no shor run impact on he PPein ihe long run PPe
shiftsxiah watd

LONA DUN

Lh) UniveIsal immunigaion Or Vaccination of children oil pitepave o

allhealthy wDrkforce in Ahe long ruO ANd genPrate donsidexable tmploument
D hegHh workeS IN Ane Shoc run.
nus, ia short un poin inside Ahe RPC LAill Mvo closer A0
Ahe Pre
and in Ahe long ul PPe 1oiLshift
YightwaTd 0s produckive vesource
ail
increase,

SHORT RUN
LONG RUN
 classmate
Dafe
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L)the AlMS Wl immediaiely qenerate employment 40 thousands and in the

long xun Wil help Ao CYeatea healthy work place.
8 An shoYt TUn point inside PPC ill move
eloxex PPe and in longea
un, th ere wil bea ighiward shift og the PPe

YAY

he 11s 00d uns oil produce bighly specialiged wDTKforce or ahe

utTe and Inmediale Impaci is employment generation 4o thousands.
O In chort un poini inside pee oill move closes to Pfe and in long Tun
Ahereoill be a rightwasd shifA Df the ppe.

L n chort tun, ih oin lead employment generation_and Hhe health btnetit

D4clean envisonment uill help p10du.ce heallhy Kesource for Ahe Autna
An shot SuD, point insicle the Ppe ill Move elosen he PPe ana m
ho long run,thehe wilu be a sightwald chifh o the Rpe
 Dafe

uuherein oseign companies ond

) 1 Calls fan forelan bivect nveAtment
advaneed AechntcCal
MNC ill set uproduclion untls in ndia wh
Ahe cconomy.
Know-houo. uil immedialely inerease produclÍDn capacahy Df
3mena will be a nigntward ahifl of Ahe PPe.