ABM MODULE A

UNIT 1
FUNDAMENTAL OF ECONOMICS ,
MICROECONOMICS AND MACROECONOMICS AND TYPES
OF ECONOMIES
Topics to study :
 The fundamentals of Economics : Scarcity and
Efficiency
 - Microeconomics & Macroeconomics in brief
 - Types of economies Market, Command and Mixed

 MEANING OF ECONOMICS
 ECONOMICS IS DERIVED FROM THE GREEK WORD
,” OIKONOMIA”WHICH CAN BE DIVIDED INTO TWO
PARTS:-
 OIKOS WHICH MEANS HOUSE
 NEMEIN WHICH MEANS MANAGEMENT
 MANAGEMENT OF HOUSEHOLD WITH
LIMITED FUNDS
 ECONOMICS IS THE A SCIENCE OF
HUMAN BEHAVIOR WHICH IS CONCERNED
WITH THE ALLOCATION OF SCARCE MEANS
OR RESOURCES.
 

DEFINITION OF ECONOMICS
 WEALTH DEFINITION
 WELFARE DEFINITION
 SCARCITY DEFINITION
 GROWTH DEFINITION

 THE WEALTH DEFINITION OF ECONOMICS

 ADAM SMITH IN 1776 LAID DOWN THE

STRONG FOUNDATION FOR THE GROWTH OF
ECONOMICS IN HIS BOOK,” AN ENQUIRY
INTO THE NATURE AND CAUSES OF THE
WEALTH OF NATIONS”


 ADAM SMITH IS CALLED THE FATHER

OF MODERN ECONOMICS.

Features of definition :
 Economics is the study of wealth only.
 It study only material goods (only tangible )
 Intangible goods like air , sunshine ,services
etc does not create wealth .
 It studies change in wealth means economic
development

Criticism of definition.
 Too much importance to wealth .
 Only tangible material goods have been taken
into consideration.
 No mention of man’s welfare.

THE WELFARE DEFINITION OF ECONOMICS

MARSHALL,”ECONOMICS IS THE STUDY OF

MANKIND IN THE ORDINARY BUSINESS
LIFE,IT EXAMINES THAT PART OF INDIVIDUAL
AND SOCIAL ACTION WHICH IS MOST
CLOSELY CONNECTED WITH THE
ATTAINMENT AND WITH THE USE OF
MATERIAL REQUISITES OF WELL BEING

 FEATURES OF MATERIAL WELFARE

DEFINITON
 Study of mankind
 Emphasised both and wealth and mankind
 Study of ordinary business of life
 Economic aspect of life

Criticism
 Differentiation made between economic and
non economic activities is impractical and
illogical.
 Only material aspect
  Wrong and impractiable because economics
studeis all those activities which are related
to income earning and income sepnding
whether they promote well being or not

 THE SCARCITY DEFINTION OF

ECONOMICS
 LORD ROBBINS:- ECONOMICS IS A

SCIENCE WHICH STUDIES HUMAN

BEHAVIOUR AS A RELATIONSHIP
BETWEEN ENDS AND SCARCE MEANS
WHICH HAVE ALTERNATIVE USES

1. Unlimited want:
 One want is satisfied another arises
 All want can never be satisfied Want keep on
multiply From time to time, place to place,
person to person.
2. Scare means:
The resources are the sources from which we earn
money or satisfy our want. For e.g. money, time, skill,
labor, all these are limited.
3. Alternate uses:
The resources can be used alternatives. Here we had
taken "MONEY".
MICROECONOMICS AND MACROECONOMICS :
Economics is divided into two categories:
microeconomics and macroeconomics. Microeconomics
is the study of individuals and business decisions,
while macroeconomics looks at the decisions of
countries and governments.
BASIS MICROECONOMI MACROECONOMI
CS CS
Basic It assumes all the It assumes all the
assumption macro variables to micro variables ie
s be constant ie decision of
consumption and household and
saving are firms, prices of
constant. individual products
are constant .
Other It is known as price It is known as
name theory income and
employement theory
Examples Individual income , National Income ,
Individual output National output
Meaning Microeconomic is Macroeconomics is
that part of that part of
economic theory economic theory
which studies the which studies the
behaviour of behaviour of
individual units of aggregate of
economy economics as
whole.
Tools Demand and Aggregate demand
supply and aggregate
supply
Objective Determining factor It aims to determine
of production or income and
price of commodity employment level of
economy

 Maynard Keynes book - General theory of

employment , interest and Money

 Macro economics - indicator - GDP

Unemployement rate , prices indices ,
inflation

TYPES OF ECONOMIES :
 United States, England, and Japan are all
examples of market economies.
 China, North Korea, and the former Soviet
Union are all examples of command
economies.