Economics-

It is the branch of social science, which is interlinked with human psychology, political science, mathematics and even geography. Economics mainly deals in production, distribution & consumption of goods and services by an individual, society or an economy.

It will be injustice with economics to tag a single definition. There are various economist who came up with different definitions such as

According to Adam Smith- Economics is the study of wealth

According to Alfred Marshall- Economics is not only the study of wealth but also deals in welfare or well being

According to Lionel Robinson- Economics is the study of Human wants are unlimited with scare resources, which leads to choice.

According to paul Samuelson –  “Economics is the study of how people and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in the future among various persons and groups of society.”

Other Definition of Economics- Economics is the study of dealing the central problems or basic economic questions raised in an economy- 1. What to produce?  2. How to produce?  3. For whom to produce? 4. How much to produce?

Branches of Economics-

a. Micro economics, b. Macro economics, c. Global economy or International Economics

Micro economics – The term Micro derived from Greek word “MIKROS means small”. It is the study of behaviour of an Individual or Group of consumers, producers and even Government in allocating the resources (land, labour, capital and enterprise) to produce and consume the goods and services at particular cost, price and time.

Examples of Micro economics- Individual demand, Market demand, Individual supply, market supply, Price, Cost, utility, Scarcity, Choice, Opportunity cost¸ taxes, competition, Elasticity, market failure, Externalities etc

Macro Economics - The term Macro derived from Greek word “MACROS means Large”. It is the study of behaviour of all consumers, producers and Government in an economy in allocating the resources (land, labour, capital and enterprise) to produce and consume all the goods and services in an economy.

Examples of macro economics- Aggregate demand, Aggregate supply, Inflation, Deflation, Monetary policy, Fiscal policy, Budget, Gross domestic product. (Balance of payment, Export & Import, Exchange rate, Economic growth & Economic development, Unemployment rate)

Economic Problem-

Economic problem is universal truth of each and every economy, It is the problem arises due to unlimited human wants and scarcity of resources. Above we have explained how a consumer, producer and Government faces economic problem.

Unlimited want-

Human wants are always unlimited, whether a consumer, a producer of a Government, all faces unlimited want.

Scarcity of resources-

As discussed above, human wants are unlimited (consumer, producer & Govt) however resources to fulfill the unlimited wants are always scarce. Resource for consumer is money which is scarce, Resource for producer is LLC(land Labour & Capital) which is scarce & Resource for Govt. is taxable income which is also scarce

Choice-

A situation which arises due to unlimited want & scarce resources. A consumer, producer or a Govt has to make choice.

Opportunity cost-

A situation where, The next best alternative forgone or in a simple meaning To have something, we have to sacrifice something, the thing which we sacrifice is knows as opportunity cost.

Example of Unlimited want, limited resources, scarcity, choice & opportunity cost-

With Consumer-

A consumer named Tanirika, visited a shopping mall & likes two jeans, black and blue colour and wanted to buy both, the price of each jeans is $500 and she has just $600 in her pocket. Here unlimited want is two jeans and scarcity is money. Since she cannot buy both the jeans, she has to make a choice between two, she made her choice and bought black colour jeans and sacrificed the blue colour jeans, The blue colour jeans which she has sacrificed is opportunity cost. 

With Producer-

A producer who is producing two goods such as Pen & pencil with limited land labour & capital (LLC). The daily capacity to produce pen or pencil is 10000 units each however producer’s unlimited want will be to produce more than 10,000 units which is not possible with scarce LLC since he has to make choice.  If he is producing 10,000 pen then he has to sacrifice all the pencil’s production and vice versa or to produce 5000 of pencil still he has to sacrifice 5000 units of pen. The units which has been sacrificed in both scenario is opportunity cost.

With Government- 

The main resource for the Government is taxable income which is scarce however the planned and non planned expenditure is much more (unlimited want), Here Government has to make choices in planned and unplanned expenditure and There are many projects which can never come into picture as Government has to undertake few projects & sacrifice few projects, the projects which has been sacrificed will be termed as opportunity cost.

Basic economic problem or Four basic economic questions –

Economic There are four basic economic questions arises by firms or Government in each and every economy.

1. What to produce
2. How to produce
3. For whom to produce
4. How much to produce  

1. What to produce- In an economy, Firms or Government will always face a question known as what to produce ? Either goods or services. Say an economy decided to produce goods. The problem of what to produce solved.
2. How to produce- After solving the problem of what to produce, the economy will face its second problem, How to produce the  goods. Either hiring more labour less capital or vice versa. Once an economy decided that production can be done by hiring more labour and less capital. The second problem how to produce solved.
3. For whom to produce- The third basic economic question arises in an economy is for whom to produce the goods or services? In the above explanation we have decided to produce goods. Say for example the economy is targeting to produce shoes but who will be the target consumers ? There are many varieties of shoes for different ages such as Sports shoes or formal shoes. Say an economy is targeting to produce sports shoes then the problem of for whom to produce has been solved.
4. How much to produce- This problem is based on demand and supply of goods or services. 

Factors of production –

There are many resources which are known as factors of production. These resources are essential to produce goods or services in an economy. The factors of production LLCE

1. Land – It is one of the factor of production. Land is a natural resource which is essential to produce goods or services. Example of land can be- Mountain, Desert, Agricultural land, Ocean, Sea, River, Industrial land etc. These are considered as land because we often get either resources or it is used to produce further goods or services.

Reward for land- Rent

Mobility of land- Geographically its immobile however occupationally its mobile the same land can be used for different purpose

Question- Can we consider residential land as Land YES or NO ? Discuss this with our experts today or watch our YouTube videos https://www.youtube.com/channel/UCoqI7C9rI2UbFPITF2bPgnQ

2. Labour – Labour is considered as human resource, which is used to produce either goods or services or both. Labour can be categorized as Skilled or Unskilled labour- Skilled labour such as  Engineer, Doctor, Teacher, Professor, Designer, an Actor etc these are skilled labour because proper education & training is required to do skilled job, whereas Unskilled job such as construction workers, here proper education that is 12 to 16 years of education  and training is not required to lift bricks. There are various interesting examples available to understand Labour.

Reward for labour- Wages

Mobility of labour- Labour is mobile, however there are many factors which are behind the immobility of labour such as Children education, Social, family, language & culture, Legal restrictions etc

3.  Capital – Capital in economics can be considered as machines. It is machines which is used to produce goods or services. There are many circumstances Capital as consider as stock or money but in economics we only consider machines. It is also a matter of discussion and debate. Few other capitals such as Financial capital, natural capital, Physical capital etc

Reward for capital- Interest

Mobility of capital- Its mobile, however giant machines such as railway tracks inside the mining is not mobile. It is difficult to take it our or may be cost of taking it out will be very expensive.

Question – Why in economics capital is knows as only machines but not money or stock or all ? 

Question- How Interest can be consider as reward for capital ?

For more details watch our videos or get in touch with our experts https://www.youtube.com/channel/UCoqI7C9rI2UbFPITF2bPgnQ

4.  Enterprise – The term enterprise means name of a business. For example JIO Telecom in India. It is the enterprise who take risk to produce goods and services.

Entrepreneur- The one who run the business. For example – Mr Mukesh Ambani helped his son cum entrepreneur to start JIO telecom. Here Mr. Mukesh Ambani and his son can be considered as entrepreneur

Entrepreneurship- The idea invested in the business or using the proper skills to run the business. Example- The way JIO telecom entered into Indian market is the best example of entrepreneurial skills. Free sim, Free calls, Free SMS, Free internet in early 8 to 10 months.

Reward for enterprise- Profit

Mobility of enterprise- It is the most mobile among all the factors of production

Production possibility schedule-

 It is the tabular representation of two different goods or services which are being produced at maximum level within an economy with given scarce resources (LLCE).

                                                     Schedule 1

Production possibility schedule- Production possibility curve–

 It is the curve, which shows two different goods or services can be produced at maximum level by using the scarce resources (LLCE) land, labour, capital & resources.   

Diagram 1

In the above diagram resources has been used to produce good Y and good X. Point a,b,c are the different combinations where production of both the goods are possible in an efficient way, However point e achieved inefficiency as few resources has been utilized to produce both the goods however point d is unattainable as resources are not available to produce at point d.

Question- In the above diagram, Is there any possibility that production will be possible at point d?

For better understanding visit our YouTube channel https://www.youtube.com/channel/UCoqI7C9rI2UbFPITF2bPgnQ or connect with our experts.

Shift in PPC –

There are two causes behind shift in PPC. PPC may shift outward or right and inward or left. When there will be increase in resources (LLCE) PPC will shift to the right or outward shift whereas when there will be decrease in resources (LLCE) PPC will shift to the left or inward shift.

LLCE= land, Labour, Capital, Enterprise

 Diagram 2

In the above diagram, AA’ is initial PPC, due to increase in all or any one of resources (LLCE), PPC shifted outward from AA’ to BB’ and due to decrease in the resources (LLCE) PPC shifted inward from AA’ to CC’.

Movement along PPC- 

There might be movement on same PPC from one point to another, In case if the producer or an economy has seen an increase in the demand for Good X, hence resources can be moved from one point to other point to meet the demand by producing more unit of good X and Vice Versa.

In the above diagram we can see, Initial production of good X is 10 units and Good Y is 10 units, When an economy has realized there is an increase in the demand of good X, the resources has been moved from point a to c to produce more of good X and Vice versa for good Y.

Rotation in PPC-

PPC rotates along X axis because of improvement in technology or different techniques in the production of good X.

Diagram 3

In the above diagram PPC rotates from AA’ to AB due to improvement in technology .

PPC rotates along Y axis because of improvement in technology or different techniques in the production of good Y.

Diagram 4

In the above diagram PPC rotates from AA to AB due to improvement in technology.

Shape of PPC or Why PPC concave –

 A PPC can be concave to the origin because of increasing opportunity cost. Increasing opportunity cost has been calculated in schedule 1. A concave PPC has been drawn in diagram 5.

Diagram 5

Shape of PPC or why PPC straight line- A PPC can be straight because of constant opportunity cost. constant opportunity cost has been calculated in schedule 2. A straight PPC has been drawn in diagram 6.

Diagram 6

Positive and Normative economics-

Positive economics means factual statement or any statement which is backed by evidence. Few positive statements are as follows a fall in the supply of demerits good such as diesel will lead to increase in the price of diesel. An increase in the arrival of tourist in a particular city say Singapore leads to increase in employment opportunity in Singapore.

Normative statement means value judgement, or an opinion or thought. The first positive statement  fall in the supply of demerits good such as diesel will lead to increase in the price of diesel this forces the demand to go down and its should be good for environment and this statement is normative.  The second example An increase in the arrival of tourist in a particular city say Singapore leads to increase in employment opportunity in Singapore and the government of Singapore should maintain its infrastructure as number of population may increase in the city, this statement is normative

Economic System –

 There are three types of economic system in world economy.

1. Market economic system- Private firms operates and controls the economy, there is zero government intervention however the same is not the case in real life scenario, market economic system such as USA, Singapore, UK etc are not fully controlled by private firms, there are Government intervention
2. Planned economic system- Government controls the production & distribution and allocation of resources. There is no role of private firms in planned economic system such as North korea and Cuba. These two countries are perfect planned economic system however export and imports are involved. 
3. Mixed economic system- Those economic system which combined both planned and market economic system features such as India, Pakistan, Nepal etc  Here both private firms and Government produces goods and services and allocates resources too. Whenever private firms increases the prices, the Government intervene ad control the price.