BASIC ECONOMIC CONCEPTS

Economics

studies how to use the limited resources to satisfy the unlimited wants of men.

Alfred Marshall

he defined Economics by saying, ‘Economics is a study mankind in the ordinary business of life’

Adam Smith

the celebrated English Economist and the father of Economics, termed Economics as the ‘Science of Wealth’. According to him, “Economics is a science that enquires into the nature and causes of the wealth of nations.”

Microeconomics

the study of the different agents/components of the economy as to how they make rational decisions in order to achieve the maximum level of satisfaction.

Macroeconomics

study of the aggregates of the economy. it looks into how the economy as a whole behave.

Positive Economics

• focuses on facts and cause- and-effect relationships

• It does not make opinions or judgments — it only focuses on what can be proven or measured.

Normative Economics

incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal

Full Employment

the economy is employing all its available resources (implies quantity of resources)

Full Production

employed resources must contribute to their greatest to total output (implies quality of resources)

Allocative Efficiency

a concept of economic efficiency that is attained when the goods and services produced are the ones most valued or most demanded by society.

Productive Efficiency

is attained when the economy produces at the least cost possible way.