General economics

Introduction: Definitions of Economics – Adam Smith, Marshall and Robbins - Main Divisions of Economics - Basic Concepts - Goods – Utility - Wants – Value – Price - Market and Income.

1. N.DHINAKARAN ASSISTANT PROFESSOR OF ECONOMICS VIVEKANANDA COLLEGE TIRUVEDAKAM WEST MADURAI Course Title : General Economics-I Course Code : 01AT01

2. INTRODUCTION The term ‘Economics’ is derived from two words of Greek language, namely, Oikos (household) and Nemein (to manage), meaning thereby household management . Earlier, it used to be called as Political Economy. In fact, Indian scholar and philosopher, Chanakya (Kautilya) in his famous book ‘Arth-Shastra’ has examined both kinds of activities, i.e. economics and political. Greek philosopher Aristotle had used the term economics to mean the management of ‘family and the state’. Dr. Marshall was the first to use the term ‘economics’ in 1890 in his famous work “Principles of Economics”. The science of Economics was born with publication of Adam Smiths ' book , “ An Enquiry into the Nature and Causes of Wealth of Nation” Published in 1776. In 1933, Prof. Ragnar Frisch, a famous economist of Oslo University, Norway, divided the study of economics into two parts: i ) Micro Economics, and ii) Macro Economics J.M. Keynes wrote a book on General Theory of Employment, Interest and Money in 1936 .

3. Definition of Economics 1. Wealth Definition 2. Welfare Definition Scarcity Definition

4. Wealth Definition Adam Smith ( 1723 – 1790 ) the father of economics in his book , “An Enquiry into the Nature and Causes of Wealth of Nation”in 1776. According to Adam Smith Economics as , “ The Science of Wealth” Explanation According to Adam Smith , Economics was regarded as the science which studied the production and consumption of wealth. It deals with acquisition , accumulation and expenditure of wealth . It is for this reason definition is called “ Wealth Definition”. Features of Wealth Definition: Economics is a study of Wealth only: Nature of Meaning of Wealth: Causes of Wealth: Economic Man

5. Criticism of Wealth Definition More Emphasis on Wealth Narrow meaning or Wealth: Concept of Economic Man No Emphasis on Welfare: Neglect of the problem of scarcity and choice: Neglect of means of attaining wealth:

6. Welfare Definition or Alfred Marshall Definition Alfred Marshall (1842 – 1924) was the first Economist who shifted the emphasis from wealth to welfare in his book “ Principles of Economics” published in 1890. According to Marshall “ Economics is on the one side a study of wealth and on the other more important side a part of the study of man”. Definition According to Marshall , Political Economy 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”. Features of Welfare Definition: Importance to the study of Man: Study of Social Man: Ordinary Business of Life: Study of Real Man Material Requisites Promotion of Welfare: Money is the measure of material welfare:

7. Criticism of Welfare Definition Regarding Ordinary Business of Life: Limited Scope: Uncertain Concept of Welfare: Economic is a Human Science: Not Analytical but Classificatory Impractical:

8. Scarcity of Economics or Robbins Definition Lionel Robbins not only Criticized Alfred Marshall Welfare Definition , but also provided a new definition in his book, “ Nature and significance of Economic Science” published in the 1932. Definition Robbins defines Economics as “ The science which studies human behavior as a relationship between ends and scarce means which have alternatives uses” Features of Scarcity Definition: Various Ends Scarce Means Alternative Uses of Means Varying Importance of Wants

9. Criticism of Scarcity Definition Concealed Concept of Welfare Scarcity is not the Cause of Economic Problem Not fully applicable to rich countries Not applicable to centrally planned economies Not applicable to under developed countries:

10. Main Division of Economics 1.Consumption 2. Production 3.Exchange 4. Distribution 5.Public Finance

11. Basic Concepts in Economics Meaning of Goods: Anything that satisfies a human want is called goods. Goods A) Free Goods B) Economic Goods

12. Utility Meaning of Utility In Economics , Utility means , “the capacity or power of a thing to satisfy human wants”. Features of Utility 1. Utility is subjective 2. Utility does not mean Usefulness 3.Utility is variable 4. Utility is not Measurable

13. Wants Human Wants Human being has many desires which culminate into wants. There is no end to human wants. Some wants are to meet basic necessities of life whereas some are to make life more comfortable and luxurious. Features of Human Wants: Human wants are unlimited Want is satiable with respect to time / place Wants are Complementary Wants are Competitive Wants are alternative Wants Recurring:

14. Value Meaning of Value: The value of commodity means its power of commanding other commodities in exchange . It is express the relationship between two commodities. Characteristics of Value 1. Utility 2.Scarcity 3 . Transferability

15. Price Meaning: When the value of a commodity is expressed in terms of money, it is called price.

16. Market Meaning: The term market refers to the interaction of buyers and sellers a particular place is called market . Market 1.Local Market 2.Natioal Market 3.International Market

17. Income Meaning: A person may earn income by rendering service. Laborers receive their income as wage daily or weekly. Teachers may receive income ( salary) monthly. INCOME Money Income Real Income

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