Par

t–1:Economi
cs

Modul
e–1.I
ntr
oduct
ion:
Lect
ure1

Def
ini
ti
on
Economicsisthatbranchofsocialsci
encewhichisconcer
nedwiththe
studyofhowindivi
duals,househol
ds,fi
rms,i
ndustr
iesandgover
nment
takedeci
sionr
elati
ngt otheall
ocati
onofli
mitedresour
cestoproducti
ve
uses,soastoderivemax imum gai
norsatisf
acti
on.

Simpl
yput,i
tisallaboutthechoiceswemakeconcerni
ngtheuseof
scar
ceresourcesthathavealt
ernati
veuses,wit
htheai
m ofsat
isf
ying
ourmostpressinginf
ini
tewantsanddistr
ibutei
tamongoursel
ves.

Nat
ureofEc
onomi
cs

1.Economi csisasci ence:Sciencei sanor ganisedbranchofknowledge,

thatanalysescauseandef fectr el
ationshipbetweeneconomi cagents.
Further
,economi cshelpsini ntegrat
ingv ar
ioussciencessuchas
mat hematics,
stati
stics,et
c.t oidentif
yther el
ati
onshipbet
weenpr i
ce,
demand, supplyandot hereconomi cfactors.

 Posit
iveEconomics:Aposi t
ivesciencei
sonet hatst
udiesthe
rel
ati
onshi
pbet weentwov ari
ablesbutdoesnotgiveanyv al
ue
j
udgment ,
i.
e.itst
ates‘whatis’
.Itdealswi
thfactsabouttheenti
re
economy.
 Normativ
eEconomi cs:Asanormati
vesci
ence,economi
cspasses
val
uejudgement,i
.e.‘
whatoughtt
obe’.I
tisconcer
nedwit
heconomic
goal
sandpolici
est oat
tai
nthesegoal
s.

Economi csi
sanart:Ar
tisadiscipl
i
net hatexpressestheway
thi
ngsaretobedone, soastoachievethedesiredend.Economicshas
vari
ousbranchesli
keproduct
ion,
distri
buti
on,consumpt ionand
economics,thatpr
ovi
degeneralr
ulesandl awst hatar
ecapableof
sol
vingdiff
erentpr
obl
emsofsoci ety
.
Theref
ore,economicsisconsi
deredasscienceaswellasart,
i
.e.sci
enceintermsofitsmethodologyandartsasinappli
cati
on.Hence,
economicsisconcernedwithbot
ht heor
eti
calandpract
icalaspect
sof
theeconomicprobl
emswhi chweencount erinourdaytodaylif
e.

Sc
opeofEc
onomi
cs

 Mi cr
oeconomi cs:Thepartofeconomicswhosesubjectmatterof
studyisindivi
dualunit
s,i
.e.aconsumer,ahousehol
d,afir
m, an
i
ndust r
y,etc.I
tanalysesthewayinwhichthedecisi
onsaretakenby
theeconomi cagents,concerni
ngtheall
ocat
ionoftheresour
cesthat
areli
mi t
edi nnatur
e.
I
tstudi
esconsumerbehav
iour
,pr
oductpr
ici
ng,
fir
m’sbehav
iour
.
Fact
orpri
cing,
etc.

 Macr oEconomi cs:I

tisthatbr anchofeconomi cswhichst udi
est he
entir
eeconomy ,inst
eadofi ndiv i
dualunit
s,i
.e.l
evelofoutput,t
otal
i
nv estment,t
otalsavi
ngs,total consumption,et
c.Basical
l
y ,i
tisthe
studyofaggregatesandav er ages.Itanal
ysestheeconomi c
env i
ronmentasawhol e,wher einthef i
rms,consumers,households,
andgov ernmentsmakedeci sions.
Itcover
sareaslikenat
ional
income,gener
al pr
icel
evel,
thebalanceof
tradeandbalanceofpayment,l
evel
ofempl oyment,l
evelofsavi
ngs
andinvest
ment .

Thefundament aldi
ffer
encebetweenmi croandmacroeconomicsli
esin
thescaleofstudy.Furt
her,i
nmi cr
oeconomics,morei
mpor t
anceisgiv
en
tothedeter
minat i
onofprice,whereasmacroeconomi
csisconcerned
withthedeter
mi nat
ionofincomeoft heeconomyasawhol e.

Nevert
heless,
micr
oeconomicsandmacroeconomics
arecomplementar
ytooneanother
,ast
heybot hai
medatmaxi
misi
ng
thewelf
areoftheeconomyasawhole.

From thestandpoi
ntofmi cr
oeconomi cs,theobject
ivecanbeachi ev
ed
throughthebestpossibl
eallocationofscarceresources.Conver
sely,
if
wet alkaboutmacroeconomi cs,t
hisgoalcanbeat tai
nedt hr
ough
theeffecti
veuseoftheresour cesoftheeconomy .
ht
tps:
//y
out
u.be/
a3Pki
y1BbG0