1. SAVAN BHUVA(08) DIVYESH GANVIT(28) DHRUNAD JOSHI(37) DASHARATH KANZARIYA(45) MILAN LAKHANI(49) HARSHAD PARGI(62)ELECTRICAL

3.  Introduction Most of the words in English are derived from Latin and Greek Language. 'Economics' word is also derived from two Greek words — `0ikos' and `Nemein'. `Oikos' means 'household' and `Nemein' means 'Management' Management of household is known as economics because as every household has limited resources and unlimited wants so they have to distribute these resources in such a way that they can satisfy their maximum wants

4.  MEANING OF ECONOMICS The definitions may be classified into three categories for simplify and clarity as under: Adam smith, J. B. Say, J. S. Mill. (A) Wealth oriented definition as given by classical writers like Adam smith, J. B. Say, J. S. Mill. Marshall, Pigou etc. (B) Welfare oriented definition as given by Marshall, Pigou etc. Robbins (C) Scarcity oriented definition as given by Robbins

5. (A) Wealth Oriented Definition : Adam Smith is regarded as the father o modern political economy. He defined economics as 'a science of wealth'. In his book entitled “An Inquiry into the nature and causes of the wealth of Nations” published in 1776, he described economics as a study of welth,a subject dealing with producing a study of wealth, wealth and using it

6. (B) Welfare Oriented Definition of Economics /Marshall 's Definition According to Marshall, "Economics is a study of man s actions in the ordinary business of life; it enquires how he gets his income and how he uses it" Thus it is on the one side a study of wealth and on the other and more important side a part of the study of man.

7. (C) Scarcity Oriented Definition / Robbins' Definition According to Prof. Robbins, economics concerned neither with `material means' nor wit `welfare'. In his well-known book entitled “An essay on the nature & significance of economic science.' In 1932 he defined economics as science which studies human behaviour as relationship between ends and scarce means which have alternative uses."

8.  NATURE OF ECONOMICS : While discussing the nature of economics, following questions need to consider : (1 ) Is economics a science ? (2) Is it an art? (3) Is it a positive science or normative science'? (4) Is it micro or macro

9. 1.Economics is a Science The term 'science' means a systematic body of knowledge which describes the Cause & effect relation between different variables. A branch knowledge become systematic or scientific when relevant facts are collected, classified and analysed and laws are established to explain the cause effect relationship between these facts. Ex. Laws of gravitational force. Applying this concept of science, it may conclude that economics is full- fledged science. It has reached a stage where all relevant economic facts are collected, classified and analysed in a scientific manner and general laws explaining economic facts arc laid down. For example, the law of demand tells us that other things remaining constant, demand expands other things remaining constant. demand expands with the fall in price.

10. 2. Economics is an Art Art is practical application of scientific theories. While science lays down certain theories, art puts these theories to practical use. For example : To identify and analyse the causes of income inequality falls within the purview of science and to use this knowledge for framing policies aimed at reduction in income inequality is art. According to an Italian economist, Luigi Cossa, Art does not explain theorems, it solves general problems. It is not- concerned with laws, but only with rules that simplify practice. A science teaches as to know. an art teachers as to do.

11. 3. Economics is Positive & Normative Science According to Prof. Robins economics is a positive science which studies things as they are and explains their causes & effects. It studies what is, what was and what will be? For example : Poverty in India is 26%, prices are rising continuously. Our view is that economics is both a positive and normative science. It not only tells us why certain things happen, it also says whether it is the right thing to happen. For example a few people in the world ware very rich while the masses are very poor. Economics should not only the causes of this unequal distribution of wealth but it should also say whether this good or bad. It might well say that wealth ought to be fairly distributed. Father. it should suggest the methods of doing it.

12. 4.Economics is Micro and Macro Micro economics is that branch of economics which studies individual economic units like individuals, households, firms, industries etc. For instance micro economics is concerned with the determination of price of a commodity in the market under different conditions. How rent. wages, interest etc. are determined in the factor markets is the subject matter of study in micro economics. Macro economics deals with aggregates rather than with individual units. It is concerned with the entire economy. It deals with total production consumption, savings, investment, employment etc. It is also studied in economics.

13.  SCOPE OF ECONOMICS The subject matter of economics can broadly be studied under different eads of consumption production, exchange, distribution and public finance Scope of economics consumption production exchange distribution Public finance

14.  Consumption Since the starting point of all economic activity is the existence of human wants it logical that the theory of wants or consumption. of wealth should form the first branch of economics. Consumption refers to the use of wealth for the satisfaction of wants and desires for material and non material things. It implies the consuming of the utility Production of an article and not the article itself. The study of consumption includes characteristics and classification of human wants, law of diminishing Exchange 1 marginal utility, Law of Equi-marginal utility, law of demand consumers surplus and soon.

15.  Production Next comes the study of production Distribution of wealth man of course, cannot produce or create matter any more than he can destroy it production, therefore, means creation or addition of utilities, Public Finance under production the main factors of production, the laws of returns, forms of industrial organisation (trust, pools, cartels scale of production, division of labour will be study.

16.  Exchange Under the modern complex economic organisation it is not possible for an individual is ordinary dependent on others for the satisfaction of his wants. What he does not produce for himself he obtains from others in exchange and thus satisfies his wants. In this branch of economics international mechanism of exchange -markets, money, credit instruments, banking,.international trade problems relating to foreign exchange transactions needs to be considered.

17.  Distribution The apportionment of the wealth produced amongst the different factors of production that have contributed in its production is known as distribution. Here, the share of the various factors of production in the form or rent, wages, interest and profit accruing respectively to land, labour capital and enterprise will be taken into account.

18.  MICROECONOMICS AND MACROECONOMICS Microeconomics Microeconomics The term Micro has been derived from the Greek term micro which means small. Micro economics analyses the output and prices of individual goods and services. In Micro economics, the various components of the economy will be separately studied. Micro economics is often referred to as the price theory. It deals with the theory of product pricing and the theory of factor pricing. The theory of consumers' behaviour and the theory of output and of costs are related to the former i.e. the theory of product pricing while the theories of rent, wages, interest and profit are a part of the latter i.e. the theory of factor pricing.

19. Microeconomics Microeconomics The term Macro has been derived from another Greek term means large. Macro economics looks/deals at/with the total national output of all goods and services added together, or the total national income earned by everyone in the economy, and is computed at the average price level for all goods and services. Macro economics, on the other hand, is a study of the economic aggregates taken together. It studies the economic system as a whole such as, aggregate consumption, aggregate savings, aggregate investment, aggregate employment, aggregate output etc.

20. Macro economics Focus on whole countryTop down approach Country, state, region, Group, individual Micro economics Focus on individual household and business Bottom to up approach Individual,group,house hold,business

21. Sr no Base of difference Micro economicsMacro economics 1meaningThe word micro Has been derived from the Greek word micros which means small. Microeconomics is the study of economic actions of individuals and small groups of individuals. It includes particular households, particular industries, particular commodities and individual prices. Macroeconomics is also derived from the Greek word macros which means large. It deals with aggregates of these quantities, not with individual incomes but with the income, not with individual prices but with the price levels, not with individual output but with the national output. 2objectiveThe objective of microeconomics on d side is to maximize utility whereas supply side is to minimize profits at minimum cost. The main objectives macroeconomics are employment, stability, economic growth and favourable balance of payments. 3basicThe basic of microeconomics is the price mechanism which operates with the help of demand and supply forces. These forces help to I' determine the equilibrium price in the market. national income, output and employment which are determined by aggregate demand and aggregate supply.

22. Sr no Base of difference Micro economicsMacro economics 4assumptionMicroeconomics is based on different assumptions concerned with rational behaviour of individuals. Moreover the phrase "ceteris paribus" is used to explain economic laws. Macroeconomics bases its assumptions on such variables as the aggregate volume of the output of the output of an economy, with the extent to which its resources are employed, with the size of the national income and with the general price level. 5equilibriumMicroeconomics is based on partial equilibrium analysis which helps to explain the equilibrium conditions of an individual, a firm, an industry and a factor. Macroeconomics is based on general equilibrium analysis which is an extensive study of a number of economic variables, their interrelations and interdependence for understanding the working of the economic system as a whole. 6Time periodIn microeconomics, the study of equilibrium conditions is analysed at a particular period. But it does not explain the time element. Therefore microeconomics is considered as a static analysis. Macroeconomics is based on time lags, rates of change, and past and expected value of the variables.

23. The Theory of Demand and Supply Prepared By: Zehra Hasan Sahar Zaidi Vineta Dastor

24. Objectives The Concept of Market Definition of Demand Demand Schedule and Demand Curve Law of Demand Assumptions and limitations of the law Determinants of Demand Reasons for Downward Sloping of the Demand Curve Change in Quantity Demanded vs. Change in Demand/Movement Along the Demand Curve and Shifting of the Demand Curve Definition of Supply The Difference Between Supply and Stock Supply Schedule and Supply Curve Law of Supply Assumptions of the law Determinants of Supply Change in Quantity Supplied vs. Change in Supply/ Movement Along the Supply Curve and Shifting of Supply Curve Equilibrium Changes in the Equilibrium References

25. The Concept of Market Division of individual economic units  Buyers and Sellers Buyers  consumers, firms. Sellers  producers of goods and services Market  an institution/mechanism bringing that brings together buyers and sellers Not limited to geographical boundaries, exists in many forms Interaction of buyers and sellers  Market Price of a good or collection of goods

26. The Concept of Demand

27. Definition of Demand The power to purchase a good along with willingness to purchase it If a consumer holds one of them Demand does not exist The quantity of a good that potential purchasers would buy or attempt to buy, at a certain price

28. “Demand is the representation of the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specific period of time”

29. Demand Schedule and Demand Curve Demand Schedule: -A list showing the quantity of a good that consumers would choose to purchase at different prices, with all other variables held constant Demand Curve: -graphically shows the relationship between the price of a good and the quantity demanded, holding constant all other variables that influence demand

31. Law of Demand Fundamental characteristic of demand: “All else equal, as the price falls, the quantity demanded rises, and as price rises, the quantity demanded falls.” Negative relationship between price and quantity demanded  Law of Demand

32. Assumptions and Limitations of the Law of Demand Assumptions  Income constant  no change in tastes, fashion and habits  price of related goods remains unchanged  no future expectations  no change in weather and population Limitations  Very high-priced goods  Very low-priced goods  Ignorance of the consumer  necessities

33. Determinants of Demand Price of the good Price of related goods [substitutes and complements] The size of household income Taste and fashion Expectation The distribution of income among households Number of Buyers

34. Reasons for Downward Sloping of the Demand Curve Customer effect Income effect Substitution effect

35. Change in Quantity Demanded vs. Change in Demand Change in Quantity Demanded  Occurs due to change in prices  Results in movement from one point to another on a fixed demand curve  Also called extension and contraction of demand Change in Demand  Occurs due to changes in determinants other than price  Results in shifting of the demand curve either to the right or to the left  Also called rise and fall of demand

40. The Concept of Supply

41. Definition of Supply Quantity of output brought for sale in the market at a certain price The amount of a good producers would want to produce and sell at a specific price

42. “ The amounts of a product that producers are willing and able to make available for sale at each of a series of prices during a specific period”

43. The Difference Between Supply and Stock Stock is the quantity of output which a seller has with him and has not yet brought for sale; whereas supply is the quantity of output brought from existing stock for sale at a certain price in the market

44. Supply Schedule and Supply Curve Supply Schedule: - A list showing the amount of a product that producers would produce and sell at a series of varying prices, during a certain time, with all the other factors held constant Supply Curve: -The graphical representation of the relation between the quantity supplied of a good that producers are willing and able to sell and the price of the good

46. The Law of Supply Explains the fundamental characteristic of supply “All else equal, as price rises, the quantity supplied rises, as price fall the quantity supplied falls” Positive or direct relationship between the quantity supplied and the price  Law of Supply

47. Assumptions of the Law Constant cost of production Constant price of capital goods Constant technology

48. Determinants of Supply Price of the good Resource Prices Technology Taxes and subsidies Price of Other Goods Expectations Number of Sellers

49. Change in Quantity Supplied vs. Change in Supply Change in Quantity Supplied  Occurs due to change in the market price  Is represented by movement from one point to another on the same supply curve  Also called extension and contraction of supply Change in Supply  Occurs due to change in determinants of supply other than price  Is represented by a shift in the supply curve either to the right or to the left  Also called rise and fall in supply

54. Equilibrium By: Sahar Zaidi

55. Equilibrium – Putting Demand and Supply Together When a market is in equilibrium  Both price of good and quantity bought and sold have settled into a state of rest  The equilibrium price and equilibrium quantity are values for price and quantity in the market but, once achieved, will remain constant Unless and until supply curve or demand curve shifts The equilibrium price and equilibrium quantity can be found on the vertical and horizontal axes, respectively  At point where supply and demand curves cross

58. Excess Supply or Surplus Excess Supply  At a given price, the excess of quantity supplied over quantity demanded Price of the good will fall as sellers compete with each other to sell more of the good than buyers want

60. Excess Demand or Shortage Excess demand  At a given price, the excess of quantity demanded over quantity supplied Price of the good will rise as buyers compete with each other to get more of the good than is available

62. Changes in Equilibrium Situation Increase in Demand No Change in Demand Decrease in Demand Increase in Supply Price  ? Quantity  Increase Price  Decrease Quantity  Increase Price  Decrease Quantity  ? No change in Supply Price  Increase Quantity  Increase Price  No Change Quantity  No Change Price  Decrease Quantity  Decrease Decrease in Supply Price  Increase Quantity  ? Price  Increase Quantity  Decrease Price  ? Quantity  Decrease

65. Conclusion The importance of the concept of demand of supply is evident from the following quote: “ Teach a parrot the terms “Demand and Supply” and you’ve got an Economist.” -Thomas Carlyle [Scottish Historian & Essayist of the Victorian Era]