Basics of Eco

8/11/2019 Basics of Eco

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Economics Analysis for

Business Decision

Presented By- Prof. Rajesh N Gade

Rajiv Gandhi Business School


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Definition

Economics is a social science, which studies humanbehavior in relation to optimizing allocation ofavailable resources to achieve the given ends.

Economics is a social science that studies howindividuals, governments, firms and nations makechoices on allocating scarce resources to satisfy theirunlimited wants. Economics can generally be brokendown into: macroeconomics, which concentrates on

the behavior of the aggregate economy; andmicroeconomics, which focuses on individualconsumers.


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Scope of Economics

1)Economic Activities

Production

Consumption

Investment Exchange

2)Economic System

3)Economic Policies

4)Econometrics

5)Applied Economics


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Branches of Economics

Micro Economics

Micro economics analyzes individualisticbehavior. It studies an individual consumer,producer, price of a particular, household, etc.

Macro EconomicsMacro economics is the study of aggregates oraverages covering the entire economy. such astotal employment, national income, national

output, total investment, total consumption, totalsaving, aggregate supply, aggregate demand, andgeneral price level, wage level and cost structure.


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Managerial Economics

Managerial economics generally refers to the

integration of economic theory with business

practice.


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Economic Activities

Economic activities are those activitieswhich are concerned with the production,

consumption, exchange and investment of

resources used for satisfying human wants.


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Basic economic Problem

Economicproblem is the problem relating tothe necessity of choosing what,how,and forwhom to produce and how to achieve economic

growthThe basic economic problem is scarcity which

involves a lack of resources enough to satisfyhuman needs and wants. These resources include

land, labour, capital and enterprise and cannot beenough since our wants are very extensive and achoice has to be made in the best way possible.


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Every economic system faces basic economic

problems relating to production, distributionand consumption in the society. The problem

of what to produceis more important in less

developed economy, as they do not have

skilled man power. How to produce is

another problem, as availability of resources is

different in each economy. Hence it is

important to adopt technology in production.


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The problems depend on the economic status ofthe country. Another problem is for whom to

produce; it depends on the socioeconomicideology. How much to produce is anotherproblem which depends on the Production,Potential and Size of the market? The problem ofby whom to produceis also very big. A Socialist

Economy aims at social control over productiveactivities; a Capitalist Economy gives occupationalfreedom, the Mixed Economy is the combinationof both Capitalist and Socialist economy. The last

problem is that how best the resources arebeing used. The available resources should beallocated, to get maximum total output.


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Circular Flow of Economic Activity

In economics, the terms circular flow ofincome or circular flow refer to a simple economic

model which describes the reciprocal circulation of

income between producers and consumers In the

circular flow model, the inter-dependent entities ofproducer and consumer are referred to as "firms" and

"households" respectively and provide each other

with factors in order to facilitate the flow of

income.Firms provide consumers with goods and

services in exchange for consumer expenditure and

"factors of production" from households.
http://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Economic_modelhttp://en.wikipedia.org/wiki/Economic_modelhttp://en.wikipedia.org/w/index.php?title=Producer_(economics)&action=edit&redlink=1http://en.wikipedia.org/wiki/Consumershttp://en.wikipedia.org/wiki/Firmshttp://en.wikipedia.org/wiki/Factors_of_productionhttp://en.wikipedia.org/wiki/Factors_of_productionhttp://en.wikipedia.org/wiki/Factors_of_productionhttp://en.wikipedia.org/wiki/Factors_of_productionhttp://en.wikipedia.org/wiki/Factors_of_productionhttp://en.wikipedia.org/wiki/Factors_of_productionhttp://en.wikipedia.org/wiki/Firmshttp://en.wikipedia.org/wiki/Consumershttp://en.wikipedia.org/w/index.php?title=Producer_(economics)&action=edit&redlink=1http://en.wikipedia.org/wiki/Economic_modelhttp://en.wikipedia.org/wiki/Economic_modelhttp://en.wikipedia.org/wiki/Economic_modelhttp://en.wikipedia.org/wiki/Economics


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The factors of productioninclude land, labor, capital

and entrepreneurship. The prices that correspond to

these factors of production are rent, wages and profit.

People in households buy goods and services frombusinesses in an attempt to satisfy their unlimited

needs and wants. Households also sell their labor,

land and capital in exchange for income that they use

to buy goods and services that firms

produce. Businesses sell goods and services to

households, earning revenue and generating profits.

Businesses also pay wages, interest and profits tohouseholds in return for the use of their factors of

production. Governments levy taxes on households

and businesses in order to provide certain benefits to

everyone.


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Basics of Eco