Module-V

Introduction to Economics
 Economics: Meaning
• Economics is a social science concerned with the
production, distribution, and consumption of goods
and services.
• It studies how individuals, businesses, governments,
and nations make choices about allocating resources.
• Economics affects daily lives.
• For an individual perspective, economics frames many
choices about work, leisure, consumption and savings.
• Lives are also influenced by macro-economic trends,
such as inflation, interest rates and economic growth.
Microeconomics deals with what choices people make, what
factors influence their choices and how their decisions affect
by affecting the price, supply and demand.
Macroeconomics is the branch of economics that studies the
behaviour and performance of an economy as a whole. It
focuses on aggregate changes in economy like
unemployment, growth rate, gross domestic product and
inflation.
 Demand & Supply
• Demand is an economic principle referring to a
consumer's desire to purchase goods and services
and willingness to pay a price for a specific good
or service.
• An effective demand has three characteristics
namely, desire, willingness, and ability to pay.
• Supply is a fundamental economic concept that
describes the total amount of a specific good or
service that is available to consumers.
• Supply can relate to the amount available at a
specific price or the amount available across a
range of prices.
 Law of Demand
The law of demand states that other factors being constant,
price and quantity demand of any good and service are inversely
related to each other. When the price of a product increases, the
demand for the same product will fall.
 Market Structure

1. Monopoly
2. Oligopoly
3. Monopolistic
4. Perfect Competition
 Monopoly & Oligopoly
• In monopoly, there is only one producer of a
particular good or service, and generally no
reasonable substitute.
• In this market system, the monopolist is able
to charge whatever price they wish.
• An oligopoly is similar in many ways to a
monopoly.
• The primary difference is that rather than
having only one producer of a good or service,
there are more number of producers.
 Monopolistic & Perfect Competition
• Monopolistic Competition is a market system that
combines monopoly & perfect competition.
• Example of monopolistic competition is the market
for music. Though there are many artists, each artist
is different & is not perfectly substitute to another.
• Perfect Competition is market system characterized
by many different buyers and sellers.
• There are an infinite number of buyers and sellers.
• With so many market players, it is impossible for any
one participant to alter the price in the market.
 Economic Planning
• Economic planning is making of major economic decision,
what and how much to produce, and to whom it is to be
allocated, on the basis of a comprehensive survey of the
economic system.
• The basic objective of planning is to exercise control over
the private sector of an economy.
• Controls are exercised over scarce economic resources.
• Economic planning in India started after independence in
the year 1950 when it was deemed necessary for
economic growth and development of the nation.
• Long term objectives of Five Year Plans in India are:
Self-reliant economy. Social justice and reducing the
inequalities.
 GST
• The goods and services tax (GST) is a value-added tax levied
on most goods and services sold for domestic consumption.
• The GST is paid by consumers, but it is remitted to the govt.
by the businesses selling the goods and services.
• A single common "Goods and Services Tax (GST)" was
proposed in 1999 during a meeting between the PM Atal
Bihari Vajpayee and economic advisory panel of former RBI
governors IG Patel, Bimal Jalan and C Rangarajan.
• The major advantage of GST is that it brings all businesses
under the ambit of this reform.
• The unified tax system and easy input credit avoid
cascading effect of all the taxes.
• Since this tax system is applicable all over the country, it
removes the barriers of interstate movement of goods.
• On 1st July 2017, the GST Law came into force.
 Assignment-V
1. Explain nature and scope of economics.
2. Describe different types of market structures
in brief.
3. Discuss salient features of Indian economy.
4. Write in brief:
a) GST
b) Pricing Methods
c) Economic Planning