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introduction to economics

introduction to economics

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introduction to economics

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  1. Economics

  2. The Study of Economics • Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. • Prof. Samuelson remarks that economics is the “Oldest of the arts, newest of the sciences indeed the Queen of the Social sciences”.

  3. More Reasons to Study Economics • Economics involves the study of societal and global affairs concerning resource allocation. • Economics is helpful to us as voters. Voting decisions require a basic understanding of economics. • Money and financial systems are an important component of the economic system, but are not the most fundamental issue in economics.

  4. Origin of Economics • Economics’ has been derived from the Greek Words ‘OIKOS’ (a house) and ‘NEMINE’ (to mange). Thus economics means managing a household with limited funds.

  5. Origin of Economics • Adam Smith’s magnum opus book“An Enquiry into the Nature and Causes of Wealth of Nations”published in the year 1776, laid a strong foundation for the growth of economics. • Hence ‘Adam Smith’ is rightly called as the “Father of Economics”.

  6. Why Study Economics? • Probably the most important reason for studying economics is to learn a way of thinking.

  7. The Scope of Economics • Microeconomics is the branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units—that is, business firms and households. • Macroeconomics is the branch of economics that examines the economic behavior of aggregates — income, output, employment, and so on — a national scale.

  8. Definitions of Economics • A Science of Wealth • A Science of Material Welfare; and • A Science of Scarcity

  9. A Science of Wealth • Adam Smith, J.B. Say, F.A Walker and other economists of the 18th and 19th centuries have defined economics as that part of knowledge which relates to wealth. • Adam Smith considered that the main aim of all economic activities is to accumulate as much wealth as possible. • It is, therefore necessary to analyze how wealth is produced and consumed.

  10. Criticism of Wealth Definition • “Bread-and-Butter science”, “The Gospel of mammon”, “a science that taught “selfishness and love for money”, “A dark and dismal science”, “a bastard science”, “a pig science” and so on.

  11. A Science of Material Welfare • Alfred Marshall was the first ‘neo-classical economist’ to rescue economics from ridicule, condemnation and misunderstanding. • Marshall re-originated economics and placed it on the pedestal of glory, in his classic work “Principles of Economics” published in 1890.

  12. Alfred Marshall • Marshall in his definition shifted the emphasis from wealth to human welfare. According to him, wealth is simply means to an end in all activities, the end being human welfare

  13. Alfred Marshall Words • “Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well being”. • He adds that “is on the one side study of wealth; and the other the more important side, a part of the study of man”.

  14. A Science of Scarcity • In the words of Robbins, “Economics is the science which studies human behavior as a relationship between ends and scare means which have alternative uses”. This definition is based on four fundamental characteristics of human existence.

  15. Four fundamental characteristics Scarcity Definition • Human Wants are Unlimited • Scarcity of Means • Alternative uses • The Economic Problem

  16. Growth definition • Recently, Prof. Samuelson has given a definition based on Growth aspects which is known as the ‘Growth definition”

  17. Origin of Managerial Economics • The development of the science of managerial economics is of recent origin. • After the Second World War, and particularly after 1950, with rapid expansion of international trade, the Business managers faced numerous delicate problems.

  18. Origin of Managerial Economics • The problems of the business world attracted the attention of academicians and gave rise to a special treatment of business problems. • As a result managerial economics came into being.

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