Principal of Economics
This of Economics
Economics is the science which treats wealth, i.e. how human being earn mbney and how they spend it.
Four points to describe the nature of economics are :
(a) Economics is pure and applied science.
(b) Economics is a normative science.
(c) Economics is a science.
(d) Economics is a positive science.
It has been divided into four parts :
(a) Wealth definition.
(b) Welfare definition
(c) Scarcity definition.
(d) Growth oriented definition.
Four features of Robbins's definition in economics are :
(a) Robbins's definition is analytical.
(b) Economics is treated as science.
(c) Universality.
(d) Study of human behaviour.
According to Adam Smith, economics is an enquiry into the nature and causes of wealth of nations.
Main characteristics of wealth definition in economics are:
(a) Wealth is the central point.
(b) Imagination of economic plan.
(c) Individual and social interests reconcile.
The main points of criticism of wealth economics defnition are :
(a) More emphasis on wealth.
(b) Narrow meaning of wealth.
(9 Neglect of welfare.
(d) Narrow subject matter.
Welfare economics is a study of mankind in the ordinary business of life.It examines the part of individual and social action which is most closely connected with the attainment and with the use of material requisites of well being.
.
Four fundamental prepositions in Robbins's definition are :
(a) Unlimited wants.
(©) Alternative uses of resources
(b) Limited resources.
(d) Wants vary in intensity.
The characteristics of scarcity definition are
(a) Human beings have unlimited wants. (b) The means that are available for the satisfaction of human wants are limited. (c) This leads to the problem of choice.
They have to select the use to which the scarce resources will be put
The term 'micro' has been derived from the Greek word mikros'which means 'small'. Thus, microeconomics is the study of individual units of economy such as individual consumer, individual firm and small group of individual unit such as various industries and markets.
Following are the features of microeconomics:
(a) It is a study of individual unit
(b) It is a study of small variables. ) Itis a price determination of a commodity.
The two limitations of microeconomics are:
(a) As we know that it assumes full employment which is a rare phenomenon in the present days It is therefore based on an unrealistic assumption.
(b) Microeconomics does not give a correct picture of the working of the entire economy. It explains the working of individual units only.
Macroeconomics is the study of the behaviour of large aggregates such as total employment, national product, national income, general price level of the country etc. It deals with the problems of unemployment, inflation, deflation, international trade, economic growth and economic fluctuations. Thus, macroeconomics is the national income analysis.
Four importances of macroeconomics are
(a) Helpful in understanding the working of whole economy.
b) Helpful in the formation of economic policies.
(c) Helpful in the study of growth and developments.
(d) Helpful in the development of macroeconomics.
One of the most important object of management in its decision making process is to identily the key factorS which influence the business firm over a period of time The person responsible for assisting top management in this task is called economist.
The four responsibilities of an economist are
(a) To make successful forecasting
(b) To search the measures for the increase in the earning capacity of firm.
(c) To establish contacts with the sources of economic information and experts.
(d) To keep the management informed of all the possible economic trends.
Deductive method is an important method relating to the formulation of economic theory. This method is also known as hypothetical method or abstract method. In this method, inferences are drawn from general cases to establish particular cases.
The four advantages of deductive method are
(a) It is a simple method.
(b) This method is certain and we get clear conclusion.
(c) University.
(d) Complement to inductive method.
(e) Helpful to understand economic facts
The three top management problems related with external factors are
(a) What types a cyclical fluctuations are expected in national economy in future? (b) What are the expectations of demand of goods being produced by the enterprise?
(c) What policies are expected to be adopted by competitors during coming period?
The two advantages of inductive method are
(a) Possibility of verification.
(b) Complement to deductive method The two disadvantages of inductive method are
(a) Limited use in the field of economics. (b) Limited scope of verification.
Production possibility curve shows all the possible combinations of two goods that an economy can produce, faithful utilisation of giving resources and state of technology,
The three assumptions of PPc
are
(a) Resources are fixed.
(b) There is no change in technology
The resources are not equally efficient in production of all products It means a particular resource is more efficient in the production of one product than in another
The Wealth of Nations, is the magnum opus of the Scottish economist and moral philosopher Adam Smith. First published in 1776, the book offers one of the world's first collected descriptions of what builds nation's wealth and is today a fundamental work in classical economics. Through reflection over the economics at the beginning of the Industrial Revolution the book touches upon such broad topics as the division of labour, productivity and free markets.
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