Subject – EEM (Sem – 5)

Lecture – 1
Date – 14/07/2020
Topics
- Introduction to Economics
- Definitions of Economics
- Economic & Non-Economic Activities
- Macro & Micro Economics and
Difference b/w them
In Ancient Time….
Human beings are intellectual creators and thus there
able to group, distinguish and examine their
surroundings and environments. To ensure a happy
living, they have created various institutions like the
social political and economic systems.

In the pre-historic and in the earlier historic periods,

Roman reigns built with differences and sort and
complexities by entering in feuds, fights and battles.
However, with the development and progress of
civilizations, human beings were able to logically
resource and complexities of life by creating and using
philosophical principles...And economics develop as a
philosophy in the science of rational economic
behavior.
The English word economics is a derivative from the Greek word
'Okionomos'.

Okionomos = 'Okios' + ‘Nomos'

Households Management

‘Management of Household'
The word economics in Indian
thought is a 'arthshastra' which is
derived from the Sanskrit word
'Arth' meaning 'purpose' or 'goal.'
And thus 'arthashastra' in Sanskrit
means "the science of benefits of
purpose in practical life". It
describes that the purpose of human
behavior is to seek benefits.
 Economics in Indian Thought
The history of Indian culture is almost more than 5000 years old
and thus Indian philosophy despite various aspects of human life
and provides insights into 'a way of life'

The fore 'purusharth' (purpose of human being) in Indian philosophy are

1. 'Dharma' (righteousness, duty)
2. 'Arth' (propose benefit wealth)
3. 'Kama' (desire)
4. 'Moksha' (liberation)

The activities of life done for 'Arth' (benefits) are subject matter of economics.
Any activity done with the purpose of
obtaining some benefit is called economic
activity and it is one of the four goals or
duties of human beings to create wealth as
a means of living and for material
pleasure.

2500 years ago Kautilya who is also known as

Chanakya discussed in his book 'Arthshastra' the
purpose of economic activity undertaken by the state
and the society.
1 Definitions of Economics
"economics is the study of the
By Adam Smith:

nature and causes of wealth of

nations."
He wrote in 1776 a book titled an enquiry into
the nature and causes of wealth of nations. The
book is then popularly known as wealth of
nations with this book Adam Smith is known
to have pioneered the development of
economics as a specialized area of knowledge
in the west.
2 Definitions of Economics
"Economics is the study of mankind in
By Alfred Marshall

the ordinary business of life" - it impulse

that in everyday life people usually seek
material wellbeing.
Thus this definition identifies Economics is
the study of everyday activity of human
beings and seek to explain how wellbeing is
attend from a material consumption.

This definition is narrow as it talks funny about material

consumption for material well-being. Yet it is important as
it keeps human wellbeing at the center of human activity.
3 Definitions of Economics
"Economics is the science which
By Lionel Robbins:
Studies which studies human
behavior as a relationship between
ends and scares means which have
alternative uses".
Any field of science deals with a problem Question and
economics deals with the question, "how to allocate
limited resources which have alternative uses in the
satisfaction of recurring and unlimited human wants in
order to increase the wellbeing in a society" ? Hence, in
1931, He gives in his book, "Nature and Significance of
Economics" gave the above definition,
4
By Paul Samuelson: Definitions of Economics
'Economics is the study of how people and Society
and up choosing with or without use of money to
employee scares productive resources that could have
alternative uses to produce various commodities over
time and distributing them for consumption now or in
the future among various person in this society it
analysis cost and benefits of improving patterns of
resource allocation."
He defined above definition in his book 'Foundation of
Economic Analysis' published in 1947.
He was first American who wins Nobel Prize for
Economic Research.
 Economic Activity & Non-Economic Activity:
ECONOMIC ACTIVITY
 Activity performed with the purpose of getting economic benefits
in the form of incomes involving exchange of goods service and
or factors as well as involving cost is called economic activity.
 Important aspects about an economic activity part-time to purpose
of making economic gains, satisfaction of some wants and;
involvement of exchange and cost.

Thus, Human requirements are plenty. Activity for

fulfillment of a requirement to a transaction which involves
costs and benefits on both sides is called an economic
activities. Farmers, lawyers, actors, governments - all
perform economic activities.
 Economic Activity & Non-Economic Activity:
Activity which is performed without the specific
NON ECONOMIC

purpose of obtaining economic gains is called non-

economic activity.
ACTIVITY

It does not involve exchange of benefits on

both sides of the transaction.

For example charitable activity or activities which are done

out of love, affection, compassion etc. These activities
involve costs but these costs are not incurred to get
monetary/economic benefits in exchange.
 Micro-Economics & Macro-Economics:
Economic analysis is done to study individual economic units as well as
study the economy as a whole.
Hence for the purpose of analysis, the entire study of economics is classified
into: (1) Micro-Economics (2) Macro-Economics

 It is the study/analysis of individual units of the economy. It

studies the rational behavior of individual units.
Micro  It studies the behavior of individual units of economy and
Economics microeconomics analysis uses the principle of ‘marginalism’
to analyses how individual units make decisions.
 Microeconomic has set scientific principles showing behavior
of individual units.
Macro-Economics It studies issues which emerge from the entire economic set
up and impact the entire economic set up.
For example, determination of national income,
unemployment, poverty, growth rate and demographic profile
of population are topics of population are topics studied under
macro-economics.
 It has helped to give principles for resource management to
increase national income, reduce unemployment, poverty,
inflation and so on.
However, the behavior of individual economic units impact the macro-
economic parameters impact the decisions of individual economic units.
In Next Lecture …on 21/07/2020 (Monday)

Topics
- Introduction to Demand
- Factors affecting Demand
- Demand Function
- Law of Demand with Its Assumptions
and Diagram
- Exceptions to the Law of Demand
- (If possible)