1Micro – economics

What is Economics
The word economics came a Greek
word ‘Oikonomos’ whose meaning is
the one who manages household. Or
household management.
Every household has to make some
decision..
What are these decision? Who will
cook the food? Who will do the
laundry? Who will drive the car, who
will pay bill? Where the kids will
study?
Each family head takes such decision
due to the fact that they have income
constraints and family has a lot of
wants.
The same thing/situation takes place
in a society as a whole….. society has
a lot of wants. Society has to make
decision like who will produce the
food? Who will work as accountant,
they need people to maintain law and
order situation and so on..
Each society faces two economic
problems..
Unlimited wants
1. They arises again and again after
sometime.
2. The goods and services which we
use to satisfy our wants expires after
some time period. Therefore , we
demand them again and again..
3. Technology factor. Because of
technology, new goods and services
are appearing in the world and we
have to demand them to meet
current world requirements.
4. We want to uplift our standard of
living. The standard of living depends
on the amount of goods and services.
Although the wants are unlimited but
they have two important
characteristics.
1. They differ in importance.
Wants can be classified into three
groups
Necessities: those wants which are
necessary to keep body and soul
together. Examples; food, cloth,
shelter and education.
Comforts: comforts bring ease to life.
Fan, motorbike, washing machine and
so on..
Luxuries: Those things which are
demanded for demonstration
purposes. For instance, precious
metals like gold, diamonds, big
houses, big cars, expensive clothes
and so on.
Wants can be postponed.
Scarce/limited resources
In economics resources are classified
as
Land: all the natural resources or gifts
of God
Labour: Human involvement in the
production process.
Capital: it includes machinery,
technology, money and building.
Organization/entrepreneur.
Is the entity or the person who
combines all other three factors of
production.
Scarcity.
In the current around 4500 billion
tone of food is produced every year.
But since it is less than the population
demand so, we call it scarce.
On the other hand, rotten
eggs/perished vegetable are rarely
produced.
Anything which is less than demand is
called scarce..
Resource are scarce but they
alternative uses..
Means one resource can be used for
more than one purposes.
For instance, you have a piece of
land.. you can use for the cultivation
of wheat/sugar/tobacco/build
house/build a factor/ leave alone..
We will the use resource where we
get greater return..
In economics, we study how a society
manages its scarce resource to satisfy
human wants.
How a society deals with the twin
problems of unlimited wants a scarce
resources