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Fundamentals of Economics, Micro &Macro Economics and Economies
Fundamentals of Economics, Micro &Macro Economics and Economies

Economics has been defined by various economists as a science of wealth or study of man in ordinary business of life or study of wealth or of man or of human welfare etc. There are various sets of definitions of economics, as under:
Wealth definition : given by Adam Smith, David Recardo, J.V. Say and J.S. Mil.
Welfare definition : given by A Marshal.
Scarcity definition : given by L. Robbins.
Growth oriented definition : given by Henry Smith and Samuelson.
Definition of A. Smith : Economics is study of wealth.
Definition of A Marshal : Economics is a study of mankind in ordinary business of life.
Definition of L. Robbins : Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. It can be concluded that:
Human wants are unlimited. Means to satisfy the wants are limited. All economic activities are undertaken to satisfy human wants.
Resources have alternative uses also. With Rs.loo with you, you can have food or you can see a movie and not both. 4 Consumers have to make choice to make use of limited resources.
Micro and Macro Economics
The micro economics studies the basic or individual units, say a consumer or a household, in .the economy and includes:
Price determination of a commodity (demand theory and supply theory).
1)) Reward determination for factors of production i.e. land, labour, capital and enterprise (Distribution theory covering rent, wages,
interest profit respectively)
Micro economics - It is the study of individual units, small variables and individual pricing. But it is helpful in understanding the working of whole economy and including of private sector. Micro economics studies :
r) how the firms and house holds take decisions to allocate resourceS how their decisions and behaviour affect the supply and demand for
goods/services, which determine price
how price determines the demand and supply.
Macro economics - The macro economics on the other hand, takes into account the entire economy. Accordingly, it deals with
employment theory, income theory, theory of price level,
theory of growth and theory of distribution. As a result, it studies national income, national output, national expenditure, the level of
savings and investment and level of employment.
Central Problems of Economy
There are 3 problems before economic organisation:
1) what to produce and when to produce 2) how to produce (what resources to be used, what technology to use)3)for whom to
produce (who will be consumer of these goods)
Types of economics
Each economic structure takes in to account, 3 basic parameters i.e. (0 what to produce (2) how to produce (3) for whom to produce.
The economies are organized in two different ways of organizing and economy i.e. Govt. managed 11(1 market managed. These economics
1. Market economy or capitalistic economy: In many countries of the world the economic st,.‘11-. follow the market economy
system. In this system, the firms and individual decide about
production and consumption. Firms produced commodities that earn for them the highest amount profit. Consumption is decided by
individual decisions. A market economy, where the govt. does not interfere is'called LAISSEZ-FAIRE economy.
Socialistic or Command Economy: In a command economy, all decisions regarding production and distribution are taken by the govt. The govt. owns most of the factors of production..
Mixed economy: In the present set up none of the above two economic systems actually function. Rather there is a mixed system. The
production and consumption decision are left tomarket but Govt. regulates the overall economic activities by enactment of rules, laws,

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