Basics of Eco
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Transcript of 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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