Economics- Fundamental Concepts

Economics- Fundamental concepts Economic Activities • Economic activities are all the activities that are performed in exchange of some material benefits. • Any activity where two or more parties are involved in the exchange of material benefits is referred to as the economic activity. Examples • Economic Activities: Services, business, shop keeping, buying, selling, services of Doctors and advocates and all the activities where something of material value is received and given by two or more parties. • Non-economic activities: mothers affection to children, services to the friends and such other activities where there is no exchange of material benefit. • Begging is also not an economic activity though there is transfer of material benefit Economics- Definition • Economics is the study of Human activities related to satisfaction of unlimited wants with limited means. • It is a branch of knowledge that deals with human effort of acquisition, allocation and utilization of limited resources to optimally satisfy unlimited wants. Economics- Features • Unlimited wants • Scarce / Limited Resources • Alternative uses of resources • Goal of optimization • Selectivity (Choice) Fundamental Economics Problems • What to produce • How to produce • For whom to produce • Problem of efficiency • Problem of full employment • Problem of growth Economy/Economic system • Is a the complex system of economic decision making units, their decision making process, the exchange of resources among them and their influence in the decision making process of each other. Members of economy • House hold • Producer/ business firms • Government

Members of economy: Household • consumers of goods and services and suppliers of the productive resources • Payer of Price for the goods and recipient of Rent, Wages and Interest • Buyers of the Commodity Market and seller of the Factor Market. Members of economy: Industry • Producers of goods and services and user of productive resources • Payer of rent, wage and interest and recipient of price • Buyer in the Factor Market and seller in the Commodity Market. Members of Members of economy: Government • Facilitator in the open economy and controller in the protected economy • Ensure fair exchange of goods and services and productive resources by enforcing rules, regulations and policies • Ensure proper distribution of the output by imposing taxes and duties. Macro and Microeconomics Macroeconomics: • Branch of Economics, which studies functioning of economy as a whole. • Deals with either the economy as a whole or with the basic subdivisions or aggregates. Microeconomics: • Branch of Economics, which analyzes the behavior of the individual components like Industry, firm, house holds or individual • Studies and analyzes the behavior of individual decision making units such as households, firms and resource owner. Other branches of economics • Development Economics • Welfare Economics • Labor Economics • Managerial Economics Business Economics • It is the application of microeconomic theory and methodology to decision making situations faced by business and not business organizations. • Managerial economics are the applications of those concepts and techniques of Management and Economics that enables the managers to allocate the organizational resources efficiently and to respond to the tactical issues effectively. Features • Blend of management and economic theories • Provide quantitative tools for decision making • Used with different purposes by different types of organizations • Sometimes characterized by the use of macroeconomic theories