1 ECONOMICS ?

Chapter No 1 Introduction to Economics Prepared By Kokab Manzoor 2

Chapter`s outlines Some basic concepts of Economics Definition of Economics Scope of Economics Economics is a science or an Art? Branches of Economics 3

4 Some basic concepts of economics Goods Services Needs & Wants Resources Scarcity of Resources Allocation of Resources

5 Goods. All t hose tangible things which are used to satisfy human needs and wants are called goods. Services. All those economic actions which satisfy human wants and needs and those are done for money rewards are known as services. Explanation of the given concepts

6 Human needs. There are so many needs of human beings but the most important are food, cloth and shelter for the existence and survival of every human. These are called basic needs. Needs are divided into two kinds. 1.Economic needs. All those needs that are achieved and satisfied with the help of money are known as economic needs for example all goods and services. 2.Non-economic needs. Those needs which are achieved free of cost are known as non-economic needs for example oxygen, sun light, etc. These are gift of God CONT`D

7 Resources. Anything which generates revenue is known as resource. such as land, man power, machines, equipments, etc. Scarcity. It means resources are limited to satisfy unlimited wants. Allocation. It is the process of selection of needs & wants and how much resources to be used to satisfy them. CONT`D

DEFINITION OF ECONOMICS 8

9 Professor Lionel Robins Lionel Robins (1898 to 1984) was a famous British economist. He was Head of “London school of economics UK”. He wrote a book “ Nature and significance of economic sciences” in 1931, in which he defined economics in terms of some realistic economic problems of human beings.

10 Robins` Definition “ Economics is the science which studies human behavior as a relationship between multiple wants and limited means which have alternative uses”. This definition points out the problem of scarcity and choice in the economic life of people. There are three main points of his definition which are given as under. 1.Multiple wants. 2.Limited means. 3.Alternative uses.

11 Major points of Robins definition. Multiple wants. Multiple wants mean there is no limit of wants of human beings. Wants are unlimited and some of them keep on rising again and again. This mean they do not come to an end even if they are satisfied once. Limited resources. There is no limit to human wants, but the resources to satisfy these wants are limited. So it is the situation when resources are not enough to satisfy all the wants and needs.

12 Alternative uses. The third point of definition is alternative uses of limited resources. For example, a person has money resource of Afs, with this limited resource of money income he can purchase various things. He can buy cloths, food, or can pay utility bills, rents or can use it for entertainment etc. In short we can say that as per Robins “Economics is the science of choice” CONT`D

Conclusion Economics is the social science that deals with how society allocates its resources among its unlimited wants and needs. 13

SUBJECT MATTER OF ECONOMICS UNLIMITED WANTS ECONOMIC ACTIVITIES REWARD ACQUISITION OF GOODS & SERVICES SATISFACTION 14

15 Unlimited Wants Satisfaction Acquisition of Goods & services Reward (Rent, wages, Interest, profit) Economic Activities (Land, Labor, capital, org.) SUBJECT MATTER OF ECONOMICS

Explanation We know that wants are unlimited. To satisfy these wants we do some economic activity by using four factors of production (land, labor, capital and organization). As a result we get reward in the form of rent, wages, interest and profit. So with these reward we buy goods and services and get satisfied. But still there are some more wants to be satisfied. So the cycle goes on. It is also known as Economic life cycle of people. 16 SUBJECT MATTER OF ECONOMICS

IS ECONOMICS SCIENCE OR AN ART? 17

18 SCIENCE Collection of facts through observation or experiments. 1Positive Science Facts collected and accepted, there is no critical evaluation. E.g. Geography 2Normative Science Analysis of facts are made. How these facts ought to happen. E.g. sociology, Psychology, Political science etc.

ART. When the facts that are studied in a science are followed in real life, it makes the science an art. For exp, a doctor studies science, but after becoming doctor he puts his knowledge into practice by attending patients. 19

When economics study the facts it is said to be positive science, when suggestions are made to change the facts to achieve the desired results, it is said to be normative science. And when practical steps are taken to put the suggestion in practice, we see economics as an art. For exp, Govt provides incentive to private sector to boost production or Labor economics etc. 20 Economics Is A Science As Well As An Art

Branches of Economics MICRO-ECONOMICS Micro means millionth part. In Micro Economics we study the small part of an economy. For example the demand of a single person or a firm, consumption of a person etc. MACRO-ECONOMICS Macro means large. In Macro Economics we study economy as a whole. For exp we talk about Aggregate demand and aggregate supply, inflation, consumption function, foreign trade, etc. 21