Intermediate economics

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Intermediate

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CHAPTER 1 INTRODUCTION

The origin of the subject could be traced to the works of Greek philosopher, Aristotle, who confined the study of economics to House hold management and acquiring , guarding and making proper use of wealth. It is important to note that the word 'economics' has been derived from the Greek words 'oikos' (home) and 'nemier' (to manage). Thus economics means managing the house hold with limited funds. Economics is the study of how society manages its scarce resources.

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CONCEPT OF ECONOMICS

Free Good:- a good that is not scarce, and therefore is available without limit and available in as great a quantity as desired with zero opportunity cost to society. Example: Air, Sunlight, Web-page, intellectual ideas Economic Good:- good or service that has a benefit (utility) to society, i.e a commodity or service that is useful to man but that must be paid for usually used in plural. For example, if we pick apples from a tree, it means that other people will not be able to enjoy them. Consumer goods are products bought for consumption by the average consumer. Alternatively called final goods, consumer goods are the end result of production and manufacturing and are what a consumer will see stocked on the store shelf. Clothing, food, and jewelry are all examples of consumer goods.

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Producer goods, also called intermediate goods, in economics, goods manufactured and used in further manufacturing, processing, or resale. Producer goods either become part of the final product or lose their distinct identity in the manufacturing stream. As they help in producing other goods, they are known as producer goods. For example machinery, tools, raw materials, seeds, manure and tractor. Intermediate good is a product used to produce a final good or finished product also referred to as a consumer good. It are sold between industries for resale or the production of other goods. Intermediate goods are the goods produced between the initial goods and the final goods. For example, To make biscuits the initial good / raw material is wheat , from which flour is produced which is then used in the manufacture of biscuits.

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Wealth may be defined as those goods and services which command value-in- exchange eg Building Price can be understood as the money or amount to be paid, to get something. Value implies the utility of worth of the commodity of service for an individual Income is money what an individual or business receives in exchange for providing labor, producing a good or service Utility is satisfaction or pleasure derived from the consumption of a good or service. Welfare: state of well-being or the state of doing well especially in respect to good fortune, happiness, well-being, or prosperity must look out for your own welfare

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DEFINITIONS OF ECONOMICS

1. Adam Smith's (1723-90) Definition He was great Scottish economist He contributed to economics " An Inquiry into the Nature and Causes of the Wealth of Nations or , more popularly known as ' Wealth of Nations'—published in 1776. Adam Smith and his followers regarded economics as a science of wealth which studies the process of production, consumption and accumulation of wealth. Economics is concerned with the generation of the wealth of nations. Economics is not to be concerned only with the production of wealth but also the distribution of wealth. "The great object of the Political Economy of every country is to increase the riches and power of that country."

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2. ALFRED MARSHALL DEFINITION

He published Principles of Economics He was British economist and defined economics as the study of man in the ordinary business of life. Argued that the subject was both the study of wealth and the study of mankind Economics is a social science since it studies the actions of human beings Economics studies the 'ordinary business of life' since it takes into account the money-earning and money-spending activities of man. Economics studies only the ' material' part of human welfare which is measurable in terms of the measuring rod of money.

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3. LIONEL ROBBINS DEFINITION

The most accepted definition of economics was given by Lord Robbins in 1932 in his book ' An Essay on the Nature and Significance of Economic Science. According to Robbins, neither wealth nor human welfare should be considered as the subject-matter of economics. "Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses." From this definition, one can build up the following propositions Human wants are unlimited; wants multiply luxuries become necessities. There is no end of wants The resources to satisfy wants are scarce in relation to their demands. Scarcity of resources is the fundamental economic problem to any society.

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4. PAUL SAMUELSON DEFINITION

According to 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."

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DIFFERENT METHODS OF ECONOMIC EVALUATION

Deductive Method

Deduction Means reasoning or inference from the general to the particular or from the universal to the individual. It involves the process of reasoning from certain laws or principles, which are assumed to be true, to the analysis of facts. deduction as a "descending process"

Inductive Method

Inductive: is the process of reasoning from a part to the whole, from particulars to generals or from the individual to the universal." it as "an ascending process" in which facts are collected , arranged and then general conclusions are drawn

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Microeconomics

Microeconomics is the study of the behavior and interaction of individual economic agents like individual, firms, consumers, and governments. It deals profit maximization, utility maximization, revenue or sales maximization, production efficiency, market structure, capital budgeting, environmental protection, and governmental regulation.

Macroeconomics

Macroeconomics is the study of aggregate economic behavior Macroeconomics is the study of entire economies and economic systems and specifically considers such broad economic aggregates as gross domestic product, economic growth, national income, employment, unemployment, inflation, and international trade

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DIFFERENT METHODS OF ECONOMIC EVALUATION

Partial equilibrium

It studies behavior of individual decision making unit in particular market. It shows a condition equilibrium in a single market with a single type of consumer. For example Utility maximizes, firm cost minimizes , and maximizes profit under various market structures and

General Equilibrium

It examine a settings of markets for different goods and multiple consumers. It deals with the interrelations among various decision-making units and various markets. Analysis that takes account of the inter relationships among prices.

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END OF CHAPTER ONE