Economics

EConomics b the study of scaMce mesOUYe to satisfu

unlimited human wants
uitt tte
St is albo knoan as socal saence onceNned aith and
þaoductlon dístiibution and consunbton of gods
Sevices.

ndividuals Paoducticn
Ysoods and Mee t
Make Choies 09
Daisions to Jorstaibotion ofSeuices, încaeasing
Demands
Businesses AllocateleSOUHe in an
Jith Sance
Dusing Scascity zEconomy
to
ResowHes
fo!
Consumbton of
Govexnments|
Th9yee Centyal Poblems f Economg 3

What to PHoduce? How to Puodvce 9Fo4 whom to Bioduce?

Deciding o alocateDeciding the technige Deciding between
diffenent cass of
pioducog gods
yesouMces fo Pod toH baoductng intensi ve the soclety such qs
fion between diffeuunt like labo
necessauu H cabital intensi veeblodlucng fo ich
9oods lke
lorwy ett.
PHoduction Possibility Fiontest.
he poductfon possibily farontiey gives thethecombira tion of
yesoUH(PS Ot
Va Qus things that cu can pHoduce wthen
the eeaom y ae fully wtlised.
 Eveny economy has to choose one of the many bossibilites
thot has

Osganisatfon of conomic Ativties t

Centally Planned Economy
the centosal awthouitu plans all the
Jhe goenment 094
imbawtant activities in the economy
bauticuhu allocation of tesbun ces arid
Hy to achieve 'a fial combihation of:
a conseguent distibution. of the
a thought to be desisable
g0ods and seices cshich is
fos society qs whole
Advantages Disadvantages
- Social/ welfae - No motiua tion o þu ocluce
Less eneguality bettey good s-
Discouwage entaep4eneun
- Moe allondabie. - lesg choices auith cbromeH
Poeven t Con centaa tfon of
Cwealth

The MaH ket Economy &

" AIl economic activities ae oonganised thaough the mauket.
Amauket s set of auaNgUments whene economic agents
can fueely erchange theiu endo uments cA bHoducts with
each otheu.
Sn sevices come
a mauket system, all goocs aa services con wth a
h9uice at ashich the erchanges take blaces
 Advantag Dis advantage
Getten choices incqunlitios
Mo1e onnovatfon - Jako of social oelhaug
sn Encouuage in þuo duc tion

Onganisaton of Economic Activities

Free Market Economy Comand Fconomy
Oanership| Fi1ms owned by batvate secto nclu sts Cwned and managd
by the govenment.
Snceries Paof motive acts as tncentive Goveunmemt give itle incentive
fog ownes and mangeus tobe elfitent and offtable
Putces Patces detenined by sbbly and Piíce contaols
demand
Eficiercyl Sncen tives on fims to be |Govenment owned founs have
efficient and cut Costs less Incentives to be efficient.
Eouality |oee mauket lihely to leo d to Govesnment may bovide maHe
income and weath inequaityenaiitable distuibution of
HesOwHCes
Erombles Hong - kong Singapoe- have Soviet Union , Ching (ntil
limlted goveunment inteventon 1970s) uba
Paoblems Snegualit mauket foilwe Snelhiciency, buseau ca Otic
Shotag Sunbluse5, less
monokoly choices.
Branch of Eonomic s
MacHo
Micno
Sndividval
County leve/
 MicHo Econoroics MacHo Economics
the entiHe
-MicyoeconomicCs Js the byanch
economics hat ConcentHates on
of- n macMoeconomic s,
e conomic bhen omena a! the
OveN all economy talked about
the beba vio! and þevfomance
tocu ses on the
of the individual economie agents- Basicalls» ftand
behavi ouH teufomance
within the ecopomy vauiables and
Consumenb,fomilu.Ddustw of aggyegate
" Juch as those issves cohlch affect the
fins etc
St ascertains how the linited whole economy
MesOwNCes aue alloca ted among t+ înclvdes egional, nat'onal
and intetnational economies
vaaioub indivfduals to satishy and coveNb the mafa aHeas
theis wants of theeconomy Ike enbloyment
bovety etc.
Chasactewistics of MicHo economic s
&conomic Analysis of idivi dual.
Study About Limitedness.
Related to FactoH And RHOduce ouice.
Useful fou ResouHce and Polfy fanulation.
MicAO economics |MacHo economics
hdividual maket Whole economy GDP)
> Effect a9 huice of a 5Soflation Cgunesal þice)
good Embloyment /unempoyment
4 Sndividual labouwH Rgguegate demand (AD)
mag ket.
4 hdividual onsuner Puoductive cabacity of
behaviou economy
b Subbly of goods
 Positive and NoHmative Economlcs
Basis of d-fferencel Positive Economics Nomative Ecanomic
ecoromic
Meaning st fs the 6du of economic 4 nefeus to the
issues 6ubyec+to venificaio issues which involve a
value jodgement
Deals with 4t.deals with the economic 4 dedls with the opinion=
isSUes 4ela ted to bast, of economísts elated to
besen t and ftue solotfon 5 fo ecopmic
iSsues aA baoblems
he stotements un sitive he statemen% in Nom
Rebuesents eCoromics 4eb9e sent wha ative e conomics Hebesent
aas uhat is' and what shgt ovght tp be:
would. be
Veuification fo Hee facts and figwes hese statements ae
not veyifiable dt al.
tth ae wbed to veufy the
tuuth
învolves valve judge
Value Judgment t doesn'+ involves value ment and obinion6 by
Todgument 0 obinions.
economist5
TlUe a4 false these statemens ay be Jhe se statements can
Statement6 twe o4 False. neveu be toea talse
ab these fndudèohinions
only

Chabtes 2- Theoy of Consumes Behavio

- UHlity
- dhe consume 's budget
- Obtimal Choice of the Consume
- Deman d
Maubet Demand
Elasticity of Demand
"Hiliy of a commodity
yility
is is want to satrsfying capaity
he 6+onguy the desieto have something he 'gueaten is
UHillty is subyective
) 44 vaves fyom þlace to þlace 2) st vaies faom þouson to horson
Mea swe 6 of UtHility

Total UHlity Manginal UHlity

Law of Diminishing mawginal Utility
-Law of Dirninishing Maginal UIty 6tafes that maginal
fom consuming each additional wnt of a commodity
declines as t5 consumbtion nCHea ses while keeping
Conswnbtlon of othet comnodiHes Constant.
Afte a boint of time mavginal utlity bsmes constant,
At habben6 when to utilty does not change afte
onsumbtion.
Candinal Utility -
- Casdinq I wtilty assumes that utility can be erbessed n tewms
of num ber that t can be quatfied.
-eramble- eating a chocolate cake 'gives me 70 untts of vtilty.
Gandinal uility sulas fHom adyawback that - fo #eal
iIfe we do not expaess itity in nunbey
Deman d
Jhe quntity of a commo dity that a consneH ailing to
buy and able to gffo d, given buices of goods and
ronsumeH toSte s and þHesences td called demnd fo he
coMmodity
 Law of Demana
Wh en the bice of ang boduct
în CH eose6 then its de man d well fall
When its buice decHeaaes then its
demand cill cHease in he
maubet
Tesms and condi Hons
Consumen income 94emains un changed
Hen tastes and brefenences wemans unchan ged.
Law of Demand

Demand CuHve i
the guabhical lebesentation of law of Demand alle d
Demand Cuwe
St ci negative slobing c94 doan wad slobing .
Elasticity
Chang n the one vaiab'e due to the chang of anotteu
Vaiable.
Yhe two vawables cauld be Puice and qUantitu deman ded
Poi ce an d encome
Elasticity of Demand >
" 94 feus to change n guan tity demanded due to
eFex
in baice. change
Perlectly snelastic Demand.
Penacty lastic Demand
factor affecting demand of the bHoduct
Taste and Puefemence Tybe of God | Ancome cf Consme
Axailability of Substitute
 Paice Elasticits of Demand
the snCome canbe
Relation between the Conswmer Demand and
Stdied with the helb of - Tybes of Gaods
Tybes of Goods

Snferior Goods LrunyGoods

Normal Goods demand un(Heases
C

Demand iNCHeases demand deseases mONe han what

with inCHe0se n
with inCHegse N
income Jevel
ub btobotiona
the ncome level· as income ises

Necessity goods v/s cormfoxt good s

Necessity goods Comfot gods
Goods that aue needed fo human Yhese goods ae not necessity
existenc e . fo exam ble- food but maa of a tllity fo9
examble - Feoting in a
housing shelte , electrichy 9estuuant etc
Giffen Gioods and Veblen Gioods|

Veblen Goods
Giffen Goods
demand HÍses as bice
demand nc9eases with the ncHease
ríses be aUse beople
in þai te. hey auO Usually non lox ny fet feel its hiohex bice
in nate Heflects gyeateH 5tatus.
these goods aHe excebH'on to the law of demand :
Roth
demand uncweises with incweàse in þaicè.
hei s demand cuve.
Jhey have pwaNd slobing
 Public Gods 'r the Consumbtion of which does not erhast
O4 diminsh its availability fu the othen
Jhey Oe Consid ened pon exclvda ble and non iva Aous
Ex - Roads ,
Dghthouse ett
P'ivate Goods!- hís b a gcod cshich has ivaly and
excdudgbilitu. Sell a bottle of oca-Cola to
one indiviclua - othey connot on Sum ed bsva te goocs
have an cbbon tuniy cost, il we esouwMe s to pOduce
bottle of Coca- Cola we canno t We tha glass and wateH
to þuoduce otheu goods.
Rixaly f tts consumbtion by one consumen buevents
Simultaneous con Sumbtfon by othe9 Consumees ot
con sumptiorn by one baty edues he abilfty of
anothe pavts to conswme it :

Exclvdobilits t means that baoducts can fevent some

beoble Consuming the good a sevice
based on th eit ability a willinghess bay
Meit Goods hese ane the goods the buodcHon of ohich
thegoveenm ent ould want to encauHage
S:- Health educatíon vOccine fo4 some deadly d'segse.
Demesit Goods i- hese ane the goods the which is haum.
Aul to the sod'ety when boduce doH
Con sumed. in
éx - cigane Hes , Grackens ete
Groverment levies high mate of taxaion on it
Usvally