INTRODUCTION
BQS 1013 :
INTRODUCTION TO ECONOMICS
Definitions of Economics
Adam Smith !ea"th definition# $Economics is the Science
that st%dies &'od%ction ( cons%m&tion of )ea"th# *+is
famo%s ,oo-. $An In/%i'0 into the Nat%'e and Ca%ses of the
!ea"th of Nations* )as &%,"ished in 1112#
A"f'ed Ma'sha"" !e"fa'e definition# $Economics st%dies
those economic acti3ities of a socia" man )hich a'e
conce'ned )ith attainment and %se of mate'ia" 'e/%isites of
)e""4,ein5#
6ione" Ro,,ins Sca'cit0 definition#
7a%" #A# Sam%e"son 8'o)th o'iented definition#
$It ana"0ses the costs and ,enefits of im&'o3in5 &atte'ns of
'eso%'ce a""ocation#*
SUB9ECT MATTER O: ECONOMICS
Economics if conce'ned )ith the ana"0sis of
cons%m&tion. &'od%ction. e;chan5e and dist'i,%tion
of )ea"th &"%s the a""ocation of sca'ce 'eso%'ces
amon5 com&etin5 %ses#
!ith the &%,"ication of 6o'd <e0nes. =8ene'a"
Theo'0 of Em&"o0ment. Inte'est and Mone0>. afte'
the 5'eat de&'ession of the 1?30. the s%,@ect matte'
of Economics )idened#
6ORD 9O+N MAANARD <EANES
Conside'ed as fathe' of Mac'o4Economics. <e0nes
defined economics as =the st%d0 of facto's affectin5
em&"o0ment and standa'd of "i3in5#>
+e a&&'oached the economic &'o,"em of choice f'om
the &oint of 3ie) of societ0 instead of 3ie)in5 it f'om
the an5"e of the indi3id%a" as done ,0 Ro,,ins and
Ma'sha""#
MAIN :OCUS O: ECONOMICS
!hat 5oods and se'3ices need to ,e &'od%ced and
in )hat /%antitiesB
!hat methods of &'od%ction a'e %sed to &'od%ce
these 5oodsB
+o) is the tota" o%t&%t of 5oods and se'3ices to ,e
a""ocated amon5 the mem,e's of societ0B
A'e the 'eso%'ces ,ein5 %ti"iCed o&tima""0B
!hat a'e the &'o,"ems faced in Inte'nationa"
T'adeB
To )hat e;tent sho%"d the 5o3e'nment inte'3ene in
the )o'-in5 of the ma'-et fo'cesB
BASIC CONCE7TS
Economic and non4economic acti3ities#
Econom0 its fo%' secto's#
8D7. 8N7. Nationa" Income#
Mic'o and Mac'o Economics#
Economic &'o,"em !h0 does it a'iseB
Cent'a" Do' ,asicE &'o,"em of an econom0#
!hat to &'od%ceB +o) to &'od%ceB :o' )hom to
&'od%ceB
MICRO ECONOMICS ( MACRO
ECONOMICS
7'of# Ra5na' :'isch of the Os"o Uni3e'sit0 de3e"o&ed
the te'm mic'o ( mac'o economics in 1?33# The
)o'd $mic'o* is de'i3ed f'om the 8'ee- )o'd.
$Mi-'os* meanin5 $sma""* ( $ma-'o* meanin5 "a'5e#
Economic theo'0 is an inte5'ation of mic'o ( mac'o
economics# The0 a'e the t)o a&&'oaches to st%d0 the
economic &'o,"em of choice#
MA9OR AREAS O: STUDA UNDER
MICRO ECONOMICS
+o) a'e 'eso%'ces to ,e a""ocated the &'od%ction f
5oods ( se'3icesB
+o) a'e 5oods ( se'3ices dist'i,%tedB
+o) efficient"0 a'e the 5oods ( se'3ices
dist'i,%tedB
Anothe' a'ea )hich mic'o4economics st%dies is
inte'nationa" t'ade# it &'o3ides 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#
IM7ORTANCE O: MICRO4
ECONOMICS
7'o3ides a ,ette' %nde'standin5 of the )o'-in5 of
decision4ma-in5 %nits in the econom0#
7'o3ides 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&timiCations#
+e"&f%" in efficient a""ocation of sca'ce 'eso%'ces#
+e"&f%" in %nde'standin5 inte'nationa" t'ade#
7'o3ides a ,asis fo' ma-in5 conditiona"
&'edictions#
+e"&f%" in fo'm%"ation of Mode"s ( %sin5 them#
ECONOMIC 7ROB6EMS
7'o,"em of A""ocation of Reso%'ces#
7'o,"em of :%"" and Efficient %ti"iCation of
Reso%'ces#
7'o,"em of Economic 8'o)th#
The conce&t of O&&o't%nit0 cost#
6eft)itch sa0s. =O&&o't%nit0 cost of a &a'tic%"a'
&'od%ct is the 3a"%e of the fo'e5one a"te'nati3e
&'od%ct that 'eso%'ces %sed in its &'od%ction co%"d
ha3e &'od%ced#>
7RODUCTION 7OSSIBI6ITA
CURFE
77C is a c%'3e )hich sho)s a"" &ossi,"e
com,inations of an0 t)o 5oods &'od%ced
sim%"taneo%s"0 ,0 an econom0 d%'in5 a s&ecific
&e'iod )ith 5i3en 'eso%'ces and techno"o50#
Ass%m&tions iE The amo%nt of &'od%cti3e
'eso%'ces is fi;ed. iiE The'e is no chan5e in
techno"o50. iiiE A"" the &'od%cti3e 'eso%'ces a'e
f%""0 em&"o0ed and i3E A"" 'eso%'ces a'e not e/%a""0
efficient in the &'od%ction of a"" 5oods#
C+ARACTERISTICS O: 77C
It s"o&es do)n)a'ds to 'i5ht#
It is conca3e to the &oint of o'i5in#
Th'ee sit%ations of 77C %nde'4%ti"iCation. fai' o'
o&tim%m %ti"iCation and f%""4%ti"iCation of
'eso%'ces 5'o)th o' de3e"o&ment4economics#
The conca3it0 of the c%'3e 'ef"ects the o&e'ation of
the "a) of inc'easin5 ma'5ina" o&&o't%nit0 cost#
It is a"so -no)n as t'ansfo'mation c%'3e as
mo3ement a"on5 it indicates t'ansfo'mation of one
commodit0 into the othe' ,0 di3e'tin5 'eso%'ces#
7RODUCTION 7OSSIBI6ITA
CURFE
ECONOMIC SASTEMS
An economic s0stems is the socia" o'5anism
th'o%5h )hich &eo&"e )o'- and ea'n thei' "i3in5 to
satisf0 thei' )ants#
It stands fo' the tota"it0 of economic "ife of a
comm%nit0# Comm%nities a'e 5'o%&ed into
nations# Diffe'ent nations fo""o) diffe'ent &o"itica"
s0stems#
Ca&ita"ism Df'ee ente'&'ise econom0 o' "aisseC
fai'e D"ea3e %s a"oneE#
Socia"ism DCommand o' 5o3e'nment economiesE
Mi;ed economies#
:e) ,asicsGG
7'od%ction T'ansfo'mation of in&%t into o%t&%t
is ca""ed $7'od%ction* in Economics#
:acto's of 7'od%ction 6and. "a,o'. ca&ita" and
o'5aniCation o' ent'e&'ene%'shi&#
Cons%m&tion#
In3estments#
Ca&ita" fo'mation H 7'od%ction Cons%m&tion#
Uti"it0 !ant satisf0in5 &o)e' of a commodit0 is
ca""ed %ti"it0#
Is Economics a ScienceB
=Science is a s0stematic st%d0 of -no)"ed5e )hich
t'aces the 'e"ationshi& ,et)een ca%se and effect#>
:eat%'es of Science S0stematiCed St%d0. Ca%se and
effect 'e"ationshi&. Uni3e'sa" 6a)s. E;&e'iments.
Sca"e of Meas%'ement#
Cons%me'*s E/%i"i,'i%m
It 'efe's to a sit%ation )he'ein the cons%me' 5ets
ma;im%m satisfaction o%t of his sca'ce 'eso%'ces.
i#e# month"0 income#
Ass%m&tions Cons%me' is 'ationa". %ti"it0 can ,e
meas%'ed ca'dina""0. ma'5ina" %ti"it0 of mone0
'emains constant. Income of the cons%me' and the
&'ice of the commodit0 'emains fi;ed. 8oods a'e
neithe' com&"ementa'0 no' s%,stit%tes fo' one
anothe'. TasteI &'efe'ence does not chan5e#
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 a
sit%ation in )hich the'e is com&"ete ad@%stment of
the 3a'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 /%antit0 of o%t&%t
)ith the "east &ossi,"e cost o' )ith the 5i3en
'eso%'ces. he is &'od%cin5 ma;im%m &ossi,"e
o%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"it0#
!hat is economicsB
!h0 does the const'%ction ind%st'0 dese'3e to ha3e
its o)n ,'anch f'om the 5ene'a" economicsB
