Introduction to Economics

Definition of Economics:
Explores the behaviour of Financial markets including interest rates & stock prices. Examines why some people & countries have high incomes while others are poor and suggests ways how the incomes of poor can be raised without harming the economy. Studies business cycles the ups and downs of unemployment & inflation along with policies

Introduction to Economics
Definition of Economics: Studies international trade and finances & the impacts of globalization. Looks at the growth of developing countries & proposes ways to encourage the efficient use of resources. Government policies maybe used for rapid economic growth, efficient use of resources, full employment, price stability, & fair distribution of income.

Definition of Economics
Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people. Economics is concerned with the production, consumption, distribution and investment of goods and services.

Adam Smiths Contribution

Adam Smith, who is generally regarded as father of economics, defined economics as a science which enquires into the nature and cause of wealth of nation. He emphasized the production and growth of wealth as the subject matter of economics. Smith considered how individual prices are set, studied the determination of prices of land, labour, and capital & inquired into the strengths & weaknesses of market mechanism. He identified the remarkable efficiency properties of markets and saw that economic benefit comes from self- interested actions of individuals.

Adam Smiths Contribution

Criticism of Wealth Oriented Definition : --Considered economics as a dismal or selfish science. --Defined wealth in a very narrow and restricted sense which considers only material and tangible goods. --Have given emphasis only to wealth and reduced man to secondary place in the study of economics.

A. Marshalls Welfare Concept

According to A. Marshall 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 material requisites of well being. Thus, it is on one side a study of wealth; and on other; and more important side, a part of the study of man.

Characteristics of Welfare Definition

# It is primarily the study of mankind. #Takes into account ordinary business of life It is not concerned with social, religious and political aspects of mans life. # Emphasize on material welfare as the primary concern of economics i.e., that part of human welfare which is related to wealth. # Limited the scope to activities amenable to measurement in terms of money.

Criticisms of Welfare Oriented Definition

Criticized for treating economics as a social science rather than a human science. Thus welfare definition restricts the scope of economics to the study of persons living in organized communities only. Criticized because of the distinction made between economic and non-economic.

Welfare in itself has a wide meaning which is not made clear in definition.

Macro Economics of Keynes

Macro Economics is considered with the overall performance of the economy. Keynes, in his revolutionary work General Theory of employment, Interest & Money developed an analysis of what causes business cycles, with alternating spells of high unemployment & high inflation.

Macro Economics of Keynes

Macro Economics examines a wide variety of areas such as how total investment & consumption are determined; how central banks manage money & interest rates

Approaches in Economics
Scientific Approach Theoretical Approach Econometrics

Problems with Economic Reasoning

The Post hoc fallacy Failure to hold other things constant. Fallacy of composition