LECTURE 01 BY- SAGAR GUPTA

INDIAN ECONOMY

INTRODUCTION TO
ECONOMICS
 ECONOMICS

• It is the study of how people allocate scarce resources for production,

distribution, and consumption. It is about the study of scarcity and
choice.

• It finds ways of reconciling unlimited wants with limited resources.

• Father of Economics  Adam Smith

• “Wealth of Nations”  1776

ECONOMICS

MICROECONOMICS MACROECONOMICS

Micro & Macro economics

term were coined by Ragnar
Fiscer
 MICROECONOMICS MACROECONOMICS

Small Picture Big Picture

Study of individual economic units Study of economy as a whole

Major determinant is Price  Price Major determinant is Income 

Theory Income Theory
Depends on Individual demand & Depends on aggregate demand &
Individual supply aggregate supply.

MICROECONOMICS MACROECONOMICS

Microeconomics deals with Macroeconomics deals with

various issues like demand,
supply, factor pricing,
product pricing, economic
welfare, production,
consumption, and more.
various issues like national
income, distribution,
employment, general price
level, inflation , money, and
more.

Father of Macroeconomics 
John Maynard Keynes

LIQUIDITY PREFERENCE THEORY

PEOPLE KEEP MONEY IN LIQUID FORM WITH

THEM FOR THREE MOTIVES :

1. Transaction motive
2. Precautionary motive
3. Speculative motive.

NCERT CLASS 12

The General Theory of Employment,

Interest and Money, 1936
 SOCIALIST /
COMMAND
ECONOMY

ECONOMIC
SYSTEMS

CAPITALIST /
MARKET MIXED
ECONOMY ECONOMY

CAPITALIST / MARKET ECONOMY

Features :
• All means of Production & Distribution  Privately owned.

• Motive of Production  Profit

• Prices are determined by market forces of Supply & Demand.

• EX- USA , JAPAN , UK etc.

CAPITALIST / MARKET ECONOMY

ADVANTAGES:
• High Competition  Better quality  Innovation  Better Prices  Benefit for
consumers.
 CAPITALIST / MARKET ECONOMY

ADVANTAGES:
• Minimal or no intervention from the government.

• More efficiency  products produced according to the demand of the consumers

• More consumption & production  employment  development of infrastructure
 GDP growth

CAPITALIST / MARKET ECONOMY

DISADVANTAGES:
• Inequalities in income.

• Against the idea of inclusive development.

• Exploitation of working class  Hire & fire policy.
 SOCIALIST / COMMAND ECONOMY

Features :
• All means of Production & Distribution  Government owned.

• Motive of Production  Inclusive growth  Social welfare

• Prices are determined by Government.

• Socialist economy is planned economy.
• Cuba , China , North korea etc.

SOCIALIST / COMMAND ECONOMY

ADVANTAGES:
• Balanced development of society.
• Absence of market forces.
• Administrative price mechanism.

SOCIALIST / COMMAND ECONOMY

Disadvantages:
• Lack of Competition  Low quality  Not beneficial for consumers.

• Average production  Average growth

MIXED ECONOMY

Features :

• Mixture of Capitalism & Socialism

• Means of Production & Distribution  Both public & private ownership.

• Motive of Production  Fast growth with inclusive development.

• Mixed price mechanism
• India , Pakistan , Bhutan etc.
 MIXED ECONOMY

Note :
No any economy of the world is purely capitalist or socialist .
PRACTICE QUESTIONS
Q.1 Price theory is also known as (SSC CGL 1st Sit. 2010)
(a) Macro Economics
(b) Development Economics
(c) Public Economics
(d) Micro Economics

Q.2 The terms 'Micro Economics' and "Macro Economics" were coined by (SSC
CGL 2nd Sit. 2010)
(a) Alfred Marshall
(b) Ragner Nurkse
(c) Ragner Frisch
(d) J.M. Keynes

Q.3 In the national context which of the following indicates Macro Approach ?
(SSC CGL 1st Sit. 2015)
(a) Sales of Bata Shoe Company
(b) Exports of Mangoes to U.K.
(c) Income from Railways
(d) Inflation in India

Q.4 A ‘Market Economy’ is one which (SSC CGL 1st Sit. 2016)
(a) is controlled by the Government
(b) is free from the Government control
(c) in influenced by international market forces
(d) All of these

Q.5 Economic planning is an essential feature of (SSC CGL 1st Sit. 2012)
(a) Socialist economy
(b) Capitalist economy
(c) Mixed economy
(d) Dual economy

PRACTICE QUESTIONS  ANSWERS

1. D) Microeconomics
2. C) Ragner Frisch
3. D) Inflation in India
4. B) Free from govt. control
5. A) Socialist economy.