1. ENGINEERING ECONOMICS AND MANAGEMENT 2130004
GOVERNMENT
ENGINEERING COLLEGE
VALSAD
ENGINEERING ECONOMICS AND MANAGEMENT
TOPIC:-INTRODUCTION OF ECONOMICS

2. Guided by: Shuchi Patel
GROUP NAME:3 ELEC (G1)(2014)
Prepared by
NAME
ENROLLMENT NO.
1.ANTALA MANISH R.
2.BHAGAT KRISHNALI B.
3.BHOYA VIPUL K.
4.BHUT DARSHAN P.
Guided by:
Shuchi Patel

3. Difinations of economics:-
The word ‘Economics’ was derived from two greek words,oikos(a house) and nemein(to manage)which would mean ‘managing an household’using the limited funds available,in the most satisfactory manner possible.
In other word,”Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

4. Scope Of Economics:- Scope means province or field of study.
1)Economics-A Science and an Art:
a)Economics is a science.
-Economics is a social science.
b)Economics is also an arts.
Science and art are complementary to each other and economics is both a
science and an arts.
2)Positive and Normative Economics:
a)Positive science:
It only describes what it is and doesn’t indicate what is good or bad to society.
b)Normative science:
It makes distinctions between good and bad.It prescribes what should be done to promote human welfare.

5. Methodology of economics:-
There are two methods of economics.Both are useful in economic analysis.
1)Deductive method,
2)Inductive method.
In Deductive method ,we descend from the general to particular.It is useful in analyzing complex economic phenomenon where cause and effect are inextricably mixed up.
In Inductive method, we mounts up from particular to general.A particular case is examined to establish a general or universal fact.

6. SUBJECT MATTER OF ECONOMICS:
Economics can be studied through
1)traditional approach and
2)modern approach.
1)Traditional Approach:
Economics is studied under five major divisions namely consumption,production,
exchange,distribution and public finance.
Consumption:
The satisfactions of human wants through the use of goods and services is called
consumption.
Production:
It means creation of utility or production things for satisfying human wants.
for the productions,the resources like land,labour,capital and organization are needed.

7. Exchange:
The process of buying and selling constitutes exchange.
Distribution:
The process of determining rent,wage,interest and profit is called distribution.
Public finance:
It studies how the government gets money and how it spends it.Thus,in public
finance,we study about public revenue and public expenditure.
2)Modern Approach:
The study of economics is divided into:
a)Microeconomics
b)Macroeconomics.

8. SCARCITY:-
Situation in which the amount of something available is insufficient to satisfy the desire for it.
There are an unlimited variety of scarcities, however they are all based on two basic limitations
Scarce time
Scarce spending power
Limitations force each of us to make choices
Economists study choices we make as individuals, and consequences of those choices
Economists also study more subtle and indirect effects of individual choice on our society

9. MICROECONOMICS:- Micro
Micro comes from Greek word mikros, meaning “small”
Microeconomics
Study of behavior of individual households, firms, and governments
Choices they make
Interaction in specific markets
Focuses on individual parts of an economy, rather than the whole

10. MACROECONOMICS:- Macro
Macro comes from Greek word, makros, meaning “large”
Macroeconomics
Study of the economy as a whole
Focuses on big picture and ignores fine details

11. THEORY OF DEMAND AND SUPPLY
A.THE LAW OF DEMAND:-
The law of demand states that,if all other factors remain equal,the higher the price of good,the less people will demand that good. The fig. shows that the curve is a downward slope. In fig. x and y are points on demand curve.Each point on the curve reflects a direct correlation between Quantity demanded(Q) and price(P).

12. b. The law of supply:-
The law of supply states that,if higher the price,the higher the Quantity supplied.Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue. Each point on the curve reflects a direct correlation between Quantity supplied(s) and price(P).

13. C.Equilibrium:
When supply and demand are equal the economy is said to be at equilibrium. Fig. shows,equilibrium occurs at the intersection of the Demand and supply curve,which indicates no allocative inefficiency.at this point,price of the goods will be P* and the Quantity will be Q*.

14. D.Disequilibrium:-
Disequilibrium occurs whenever the price or quantity is not equal to P* or Q*. 1)Excess Supply: If the price is set too high,excess supply will be created Within the economy and there will be allocative inefficiency.

15. 2)Excess Demand:- Excess demand is created when price is set Below the equilibrium price.

16. CHANGES IN DEMAND:-
Demand of commodity may change.It may increase or decrease due to changes in certain factors.These factors are called determinants of demand.These factors include; 1)Price of commodity 2)Nature of commodity 3)Income and wealth of consumer 4)Taste and preferences of consumer 5)Price of related goods(substitutes and compliment goods) 6)Consumers expectations. 7)Advertisement ect…

17. DEMAND FUNCTION:-
There is a functional relationship between demand andits various determinants. I.e.,a change in any determinant will affect the demand.When this relationship expressed mathematically,it is called Demand Function.Demand function of a commodity can be written as follows: D=f(P,Y,T,Ps,U) Where,D=Quantity demanded P=Price of the commodity Y=Income of the consumer T=Taste and preference of consumers. Ps=Price of substitutes U=Consumers expectations & others f=Function of(indicates how variables are related)

18. EXTENSION AND CONTRACTION OF DEMAND
The change in demand due to change in price only,where other factors remaining constant,it is called extension and contraction of demand. In fig.When the price of commodity is OP,quantity demanded is OQ.if the price falls to P2,quantity demanded increases to OQ2.when price rises to P1,demand decreases from OQ to OQ1.in demand curve shows extension and contraction of demand.

19. SHIFT IN DEMAND(INCREASE OR DECREASE IN DEMAND)
When the demand changes due to changes in other factors,like taste and preferences,income,price of related goods.ect…,it is called shift in demand. If the consumers buy more goods,it is called increase in demand or upward shift. If the consumers buy fewer goods due to change in other factors,it is called downward shift or decrease in demand. The fig. shows shift in demand curve.

20. COMPARISON BETWEEN EXTENSION/CONTRACTION AND SHIFT IN DEMAND
EXTENSION/CONTRACTION OF DEMAND
SHIFT IN DEMAND
Demand is varying due to changes in.
Other factors like taste,preferences,income ect…remaining the same.
Consumer moves along the same demand curve.
Price demand is varying due to changes in other factors.
Price of commodity remain the same.
Consumer may moves to higher or lower demand curve.

21. Different types of demand:
Joint demand
Composite demand
Direct and Derived demand
Industry demand and company demand

22. DETERMINANTS OF DEMAND AND SUPPLY:-
The following determinants cause shifts in the entire demand curve:
Change in consumer tastes,
Change in the number of buyers,
Change in consumer incomes,
Change in the price of complementary and substitute goods,
Change in consumer expectations.

23. The following determinants cause shifts in the entire supply curve:
Change in input prices,
Change in technology,
Change in taxes and subsidies,
Change in the price of other goods,
Change in producer expectations,
Change in the number of suppliers,
Any factor that increases the cost of production decreases supply,
Any factor that decreases the cost of production increases supply.