FUNDAMENTALS OF ECONOMICS 1) Economics is “The science which studies human behavior as a relationship between ends and scarce means which have alternative uses. “
2) The essence of Economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way which produces the most efficient use of resources.
3) Adam Smithis the Father of Modern Economics.
4) An Enquiry into the Nature and Causes of the Wealth of Nations (published in 1776)is written by Adam Smith.
5) Economics is the study of how wealth is produced and consumed.
6) Smith’s definition is known as Wealth Definition. It gave more importance to wealth than to man for whose use wealth is produced.
7) Welfare Definitionis coined by Prof. Alfred Marshal.He described Economics as a science of human welfare.
8) Scarcity Definitionis coined by Prof. Lionel Robbins.
9) Prof. Lionel Robbins defines Economics as study of “means” and “Ends”.
a. Man has unlimited wants b. The means to satisfy human wants are limited c. Resources are not only limited but have alternative uses d. Man has to make a choice.
10) Adam Smithis considered to be the Founder of the field Micro Economics.
11) Micro Economicsis concerned with the behaviour of individual entities such as markets, firms, and households.
12) Macro Economicsis a branch of Economics that deals with the performance, structure and behaviour of a national or regional economy as a whole and concerned with the overall performance of the Economy.
13) Founder of the field of Macro Economics is John Maynard Kenes.
14) John Maynard Kenes wrote the book “General Theory of Employment, Interest and Money”.
15) An analysis of causes of Business cyclesis developed by Mr. Kenes.
16) A market Economy/ Capitalistic Economyis one in which individuals and private firms make the major decisions about production and consumption. E.g.: United Kingdom.
17) A Command Economy/Socialistic Economyis one in which the government makes all important decisions about production and distribution.
18) Mixed Economyis where public sector, private sector and joint sector coexist and complement each other. E.g.: India
19) Laissez – faire Economyis the extreme case of a Market Economy.