1. Introduction to Economics
Definition of Economics:
● Economics is the study of how individuals, firms, and governments make
choices to allocate scarce resources to satisfy unlimited wants.
● Famous definitions:
○ Adam Smith: Wealth of Nations → Economics studies the production and
accumulation of wealth.
○ Alfred Marshall: Economics studies human behavior in relation to
material welfare.
Branches of Economics:
1. Microeconomics – Study of individual units like consumers, firms, and markets.
○ Example: Demand for rice, price of petrol.
2. Macroeconomics – Study of economy as a whole.
○ Example: GDP, inflation, unemployment.
Importance of Economics:
● Helps in making decisions with scarce resources.
● Explains market behavior and pricing.
● Useful for government policy: taxation, budget, subsidies.
● Helps understand economic growth and development.
Key Terms:
● Scarcity: Limited resources vs unlimited wants.
● Choice: Deciding which wants to satisfy.
● Resource allocation: How resources are distributed for production.
Definition of Economics:
● Economics is the study of how individuals, firms, and governments make
choices to allocate scarce resources to satisfy unlimited wants.
● Famous definitions:
○ Adam Smith: Wealth of Nations → Economics studies the production and
accumulation of wealth.
○ Alfred Marshall: Economics studies human behavior in relation to
material welfare.
Branches of Economics:
1. Microeconomics – Study of individual units like consumers, firms, and markets.
○ Example: Demand for rice, price of petrol.
2. Macroeconomics – Study of economy as a whole.
○ Example: GDP, inflation, unemployment.
Importance of Economics:
● Helps in making decisions with scarce resources.
● Explains market behavior and pricing.
● Useful for government policy: taxation, budget, subsidies.
● Helps understand economic growth and development.
Key Terms:
● Scarcity: Limited resources vs unlimited wants.
● Choice: Deciding which wants to satisfy.
● Resource allocation: How resources are distributed for production.
