A social science which is concerned with the efficient
use and proper utilisation of limited resources for the
achievement of economic growth
(i) Kautilya, Arthashastra: eco & pol activities
(ii) Adam Smith, An Enquiry into the Nature and Causes of
Wealth of Nation (1776): science of wealth
(iv) Alfred Marshall: study of mankind in the ordinary business of life
(iii) Lionel Robbins, Nature and Significance of Economics Science: study of
human behaviour as a relationship between ends and scarce means
which have alternative uses
WHAT IS AN ECONOMY?
A system which provides livelihood to the people
by producing goods and services that enable them
to earn their incomes
WHAT ARE THE TYPES OF ECONOMIES?
BASED ON
Means of Production
CAPITALIST
"Market Economy"
maximise profit
operated by market
demand and supply
forces w/o direct
intervention of govt.
no limit to private ownership
UK, USA, Australia
SOCIALIST
"Planned Economy"
maxmise social welfare
operated by govt. w/
central planning
authority
private ownership under
control of govt.
China, Russia, Cuba
MIXED
"Dual Economy"
govt. aim: social welfare max.
private aim: profit max.
operated by both govt.
and private sector
partly owned govt. &
partly owned private
India, Pakistan, Sri Lanka
AKA
OBJECTIVE
OPERATION
OWNERSHIP
EXAMPLES
Economic Development
DEVELOPED
per capita income HIGH &
standard of living HIGH
USA, Switzerland, Canada
DEVELOPING
per capita income &
standard of living NOT
V HIGH NOT V LOW
India, Pakistan, Sri Lanka
UNDERDEVELOPED
per capita income is V LOW &
standard of living is V LOW
Nepal, Bangladesh, Bhutan
WHAT IS THE ECONOMIC PROBLEM?
PROBLEM OF CHOICE
CAUSES
UNLIMITED HUMAN WANTS
LIMITED/SCARCE RESOURCES
ALT. USES
URGENCY OF WANTS
ON THE BASIS OF
MICROECONOMICS
PROBLEM OF ALLOCATION OF RSS
WHAT TO PRODUCE AND HOW MUCH?
economy can't produce all and
must decide: civil/military,
consumer/capital
HOW TO PRODUCE?
which tech used:
LABOUR INTENSIVE
TECH/CAPITAL
INTENSIVE TECH
LIT: India uses bc labour is cheap
and abundant (handloom industries)
CIT: America uses bc capital is
abundant (power loom industries)
FOR WHOM TO PRODUCE?
personal distribution based on income of individual
functional distribution among owners of diff
factors of production in the form of wages,
rent, interest, profit.
MACROECONOMICS
branch of eco. deals w/ aggregate economic units
determine aggregate output, national
income and employment in economy
aggregate demand and aggregate supply
general equilibrium analysis
aggregate demand, aggregate supply and national income
FULLER UTILISATION OF RSS
ltd. rss to full satisfy maximum
wants, production max & wastage
min
ECONOMIC GROWTH
investment-resources available-capacity for production.
Therefore: ++investment = ++rss utilised efficiently = growth
in economy
branch of eco. deals w/ individual economic units
optimum utilisation of limited rss for maximum production