1. Module 1 Nature and Methodology of Economics

2. What is Economics? Economics is the study of how individuals & group make decision with limited resources as the best satisfy their wants, needs, & desires. Economics is the study of how individuals & group make decision with limited resources as the best satisfy their wants, needs, & desires. Economics is the study of making choice. Economics is the study of making choice.

3. Meaning of Economics The term economics comes from the ancient Greek word oikos (household) & nemein (manage), which in effect meant managing a household, using limited funds available in the most economical manner possible. The term economics comes from the ancient Greek word oikos (household) & nemein (manage), which in effect meant managing a household, using limited funds available in the most economical manner possible.

4. Definition of Economics Definition of Economics are divided under four heads:- 1. Science is wealth (Adam smith) 2. Science is Material welfare (Alfred Marshall’s) 3. Science of Scarcity (Robbin’s ) 4. Modern Definition

5. Science is wealth Science is wealth “ An enquiry into nature & cause of wealth of nations.” “ An enquiry into nature & cause of wealth of nations.” By: Adam Smith By: Adam Smith Adam Smith define Economics as the “Science of wealth”. Economics was regarded as the science which studied the production & Consumption of wealth.

6. Science is Material welfare Science is Material welfare “Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and the use of the material requisites of well being.”

7. Science of Scarcity Science of Scarcity ‘Economics is the science which studies human behavior as a relationship between scarce means which have alternative uses."

8. Nature of Economics Economics is a Science. Economics is a Science. Economics is a Art. Economics is a Art. Economics is a Positive Economics is a Positive Economics is a Normative. Economics is a Normative.

9. Nature Of Economics Economics is a Science. Economics is a Science. The Term science has been defined as a systematized body of knowledge which trace the relationship between cause & effect. The Term science has been defined as a systematized body of knowledge which trace the relationship between cause & effect. The fact should systematically collected,classified and analyses. The fact should systematically collected,classified and analyses.

10. Nature of Economics Economics is a Art the art is lays down a specific solution for specific problems. the art is lays down a specific solution for specific problems. J.N.Keynes “ An Art is a system of rules for the attainment of a given end.” Science teaches us to know, or an art teaches us to do.

11. Nature of Economics Economics is Positive science. It is defined as a body of systematized knowledge concerning what is. It is defined as a body of systematized knowledge concerning what is. The objective of a positive science is the establishment of uniformities. The objective of a positive science is the establishment of uniformities. It deals with things as they are. It deals with things as they are. It explains their causes & effects. It explains their causes & effects.

12. Nature of Economics Economics is a Normative Science It is defined as a body of systematized knowledge relating to the criteria of what ought to be. It is defined as a body of systematized knowledge relating to the criteria of what ought to be. The objective of a normative science is the determination of ideals. The objective of a normative science is the determination of ideals. It deals with things as they ought to be. It deals with things as they ought to be.

13. Micro & Macro Economics

14. Micro Economics The term Micro Economics is derived from Greek word Mikos (small). Micro economics thus deal with a small part or a component of the national economy of the country. The term Micro Economics is derived from Greek word Mikos (small). Micro economics thus deal with a small part or a component of the national economy of the country. Example:- How does the change of a price of good influence a family purchasing decision.

15. Types of Micro Economics Micro Static Micro Static Comparative Microstatic Comparative Microstatic Micro dynamics Micro dynamics

16. Importance of Micro Economics Helpful in efficient employment of resource. Helpful in efficient employment of resource. Understanding free enterprise economy. Understanding free enterprise economy. Helpful in development of international trade. Helpful in development of international trade. Helpful in understanding the implication of taxation. Helpful in understanding the implication of taxation. Basis for welfare economics. Basis for welfare economics.

17. Limitation of Micro Economics What is true in the case of individual unit may not be true in the case of aggregates. What is true in the case of individual unit may not be true in the case of aggregates. Micro economics instead of studying the total economy concentrates only on small parts of it. Micro economics instead of studying the total economy concentrates only on small parts of it. There are certain economic There are certain economic problem which cannot be analysed with the aid of micro economics. Example:- important problem relating to public finance, monetary & fiscal polices are beyond the purview of Micro economics problem which cannot be analysed with the aid of micro economics. Example:- important problem relating to public finance, monetary & fiscal polices are beyond the purview of Micro economics

18. Macro Economics The word ‘Micro’ is derived from the Greek word Makos meaning large & therefore, Macro Economics is concerned with the economics activity in the large. The word ‘Micro’ is derived from the Greek word Makos meaning large & therefore, Macro Economics is concerned with the economics activity in the large. Macro Economics is a study in aggregate. Macro Economics is a study in aggregate. Example:- How does change in interest rate influence national savings.

19. Types of Macro Economics Macrostatic Macrostatic Comparative Macrostatics Comparative Macrostatics Macrodynamics Macrodynamics

20. Economic Problem Economic is mainly concerned with the achievement & use of martial requirement to satisfy human wants. Economic is mainly concerned with the achievement & use of martial requirement to satisfy human wants. Human wants are unlimited & productive resources are scared or limited. Human wants are unlimited & productive resources are scared or limited. This gives rise to the problem of how to use scare resource for maximum satisfaction of the people. This is called Economic Problem This gives rise to the problem of how to use scare resource for maximum satisfaction of the people. This is called Economic Problem

21. Economic Problem Unlimited wants:- The economic problem arises not merely due to the limited resource & capacity to produce alone but also due to unlimited human wants. Unlimited wants:- The economic problem arises not merely due to the limited resource & capacity to produce alone but also due to unlimited human wants.

22. Economic Problem Scarcity of resource:- Wants of the people are unlimited means to satisfy those wants are limited or scare. It is due to the scarcity of the resource Scarcity of resource:- Wants of the people are unlimited means to satisfy those wants are limited or scare. It is due to the scarcity of the resource

23. Basic Economic Problem The scarcity of resources relative to human wants gives rise to various basic problem. The scarcity of resources relative to human wants gives rise to various basic problem. Basic problem are:- Basic problem are:- 1. What to Produce. 2. How to Produce 3. For whom to Produce. 4. What Provision be made for economic growth.

24. What to Produce This means that what goods & in what quantities are produced by a society. This means that what goods & in what quantities are produced by a society. The society has to choose among thousands of consumer goods themselves & decide about all allocation of resource between them. The society has to choose among thousands of consumer goods themselves & decide about all allocation of resource between them. Special mention in this regard is the choice between necessities & luxuries. Special mention in this regard is the choice between necessities & luxuries.

25. How to Produce This means with what method or techniques a society will decide to produce goods. This means with what method or techniques a society will decide to produce goods. A combination of resource implies a technique of production. A combination of resource implies a technique of production. There are various alternative technique of producing a commodity & the society has to choose among them with a proper combination of resource. There are various alternative technique of producing a commodity & the society has to choose among them with a proper combination of resource.

26. Whom to Produce It means who will get how much for consumption. It means who will get how much for consumption. It means how much distributed among the members of the society. It means how much distributed among the members of the society. The distribution of national income should be on the basis of “ from each according to his ability,to each according to his needs.” The distribution of national income should be on the basis of “ from each according to his ability,to each according to his needs.”

27. What Provision should be made for Economic growth Both an Individual & a society would not like to use all its scarce resource for current consumption only. Both an Individual & a society would not like to use all its scarce resource for current consumption only.

28. Methodology Static & Dynamics Static & Dynamics

29. STATIC Economic static's refers to that type of analysis where we establish the functional relation between two variable whose value related to the same point of time or same period of time. Economic static's refers to that type of analysis where we establish the functional relation between two variable whose value related to the same point of time or same period of time. Example:- The product pricing is a good example of economic statics.

30. Merits of Economic statics Simplifier:- We can study the complex economic system with the help of this simplifier device by assuming several thing as constant. Simplifier:- We can study the complex economic system with the help of this simplifier device by assuming several thing as constant. Crate understanding:- To understanding the working of the dynamic economy, a study of economic statics is essential. Crate understanding:- To understanding the working of the dynamic economy, a study of economic statics is essential. Highly Developed:- Method of statics is more highly developed than the method of dynamics Highly Developed:- Method of statics is more highly developed than the method of dynamics

31. Demerits of economic Statics Unrealistic assumption. Unrealistic assumption. Constant variable. Constant variable. No use No use It is not appropriate. It is not appropriate.

32. Economic Dynamics Economic dynamics refers to that analysis which considers the relationship between those relevant variables whose value belong to different point of time, or different period of time. Economic dynamics refers to that analysis which considers the relationship between those relevant variables whose value belong to different point of time, or different period of time. It is also a very comprehensive method. It is also a very comprehensive method. It is a very realistic method of study or investigation. It is a very realistic method of study or investigation. It is method which picturise the entire series of adjustment which take place between the break up of old equilibrium & the establishment of new. It is method which picturise the entire series of adjustment which take place between the break up of old equilibrium & the establishment of new.

33. Merits of Economic Dynamics Realistic assumption:- The study of economic become indispensable to correct the unrealistic nature of economic statics. Realistic assumption:- The study of economic become indispensable to correct the unrealistic nature of economic statics. Considerable amount of elasticity:- There is a considerable amount of elasticity in the method of economic dynamics. Because of its elasticity. It can be used to investigate all possibilities concerning a particular problem Considerable amount of elasticity:- There is a considerable amount of elasticity in the method of economic dynamics. Because of its elasticity. It can be used to investigate all possibilities concerning a particular problem

34. Demerits of Economic Dynamic Difficult method of investigation. Difficult method of investigation. It is very complex & complicated. It is very complex & complicated. It is not yet fully developed. It is not yet fully developed.

35. Economic Laws & Government Laws Economic Laws & Government Laws

36. Economic Laws The purpose of the economic law is to regulate the relations arising from the economic activities. The purpose of the economic law is to regulate the relations arising from the economic activities. In the legal system of the soviet union “economies laws” was the legal theory & system under which economic relation were a legal discipline independent of criminal law & civil law. In the legal system of the soviet union “economies laws” was the legal theory & system under which economic relation were a legal discipline independent of criminal law & civil law.

37. Government Law Government Law It deals with the governments power to regulate, that the Amerian constitution is respected & enforced through the department of justice &various law enforcement agencies. It deals with the governments power to regulate, that the Amerian constitution is respected & enforced through the department of justice &various law enforcement agencies.

38. Economics and Law The economic analysis of law (also known as law & economic) is an analysis of law applying method of economics. The economic analysis of law (also known as law & economic) is an analysis of law applying method of economics. Economic concept are used to explain the effects of laws, to assess which legal rules are economically efficient & to predict which legal rules will be promulgated. Economic concept are used to explain the effects of laws, to assess which legal rules are economically efficient & to predict which legal rules will be promulgated.

39. Types of Law and Economics Positive Law & Economics.:- Positive law and economics uses economic analysis to predict the effects of various legal rules. Positive Law & Economics.:- Positive law and economics uses economic analysis to predict the effects of various legal rules. Positive law & economics has also at times purported to explain the development of legal rules. Positive law & economics has also at times purported to explain the development of legal rules. Example:- The common law of torts, in terms of their economic efficiency.

40. Normative law & Economics It goes one step further & makes policy recommendations based on economic consequences of various policies. It goes one step further & makes policy recommendations based on economic consequences of various policies. The key concept for normative economic analysis is efficiency, in particular, allocative efficiency. The key concept for normative economic analysis is efficiency, in particular, allocative efficiency. A common concept of efficiency used by law & economics scholars is Pareto Efficiency or kaldor hicks efficiency A common concept of efficiency used by law & economics scholars is Pareto Efficiency or kaldor hicks efficiency

41. Inductive The Inductive Method is also known as historical, empirical method. The Inductive Method is also known as historical, empirical method. Induction is the process of reasoning from a part to the whole,from particular to general, or from individual to the universal. Induction is the process of reasoning from a part to the whole,from particular to general, or from individual to the universal. It is an ascending process in which facts are collected, arranged & the general conclusion are drawn. It is an ascending process in which facts are collected, arranged & the general conclusion are drawn.

42. Form of Inductive Method Experimentation approach. Experimentation approach. Statistical approach. Statistical approach.

43. Merits of Induction Economic investigation & Research Economic investigation & Research Improvement of Economic Problem. Improvement of Economic Problem. Dynamic Dynamic

44. Demerits of Induction Misinterpreted & Misuse. Misinterpreted & Misuse. Time Consuming & costly. Time Consuming & costly. Risk Risk

45. Deductive Method The Deductive method is also known as the analytical, abstract method. The Deductive method is also known as the analytical, abstract method. deduction means reasoning or inference from the general to the Particular or from the universal to the individual. deduction means reasoning or inference from the general to the Particular or from the universal to the individual. In other word its works the general to the specific this is also called a top-down approach. In other word its works the general to the specific this is also called a top-down approach.

46. Process of Deduction Perception of the problem. Perception of the problem. Making Assumption. Making Assumption. Formulating hypothesis. Formulating hypothesis. Testing or Verifying the hypothesis. Testing or Verifying the hypothesis.

47. Merits of Deduction Simple Simple Less time consuming & Less Expensive. Less time consuming & Less Expensive. It is a powerful method. It is a powerful method.