Title Chapter 1 ( Unit 1).pdf ✅

CA Hardik Manchanda 6/16/2023 Avyukt-Economics Notes 1 Chapter 1 – Nature & Scope of Business Economics CA Hardik Manchanda CA Foundation – Business Economics CA Hardik Manchanda Fundamental Facts Human Beings have unlimited wants The means to satisfy these unlimited wants are relatively scarce Subject matter of Economics  We cannot have everything we want with the resources we have, we are forever forced to make choices and therefore, we choose to satisfy only some of our wants leaving many other wants unsatisfied.  Similar dilemma is faced by every individual, every society and every country in this world.
CA Hardik Manchanda 6/16/2023 Avyukt-Economics Notes 2 CA Hardik Manchanda What is Economics? Basic Definition Economics is the study of the processes by which the relatively scarce resources are allocated to satisfy the competing unlimited wants of human beings in a society.  Of course, the available resources will be efficiently used when they are allocated to their highest valued uses.  Thus, we can say that, Economics is the study of how we work together to transform the scarce resources into goods and services to satisfy the most pressing of our infinite wants and how we distribute these goods and services among ourselves. This definition of Economics is the domain of Modern neo classical micro economic analysis. Despite being correct, it is incomplete because it brings to our mind the picture of society with:  Fixed resources, skills and productive capacity  Deciding on what specific kind of goods and services it ought to produce with the given resources and,  How they ought to be distributed among the members of the society. Two of the most important concerns of modern economies are not fully covered by the basic definition. Economics also deals with: II. Processes by which the productive capacity of the resources are increased III. Factors which, in the past, have led to sharp fluctuations in the rate of utilizations of resources
CA Hardik Manchanda 6/16/2023 Avyukt-Economics Notes 3 II. Economics also deals with the processes by which the productive capacity of the resources are increased.  Population and labour forces have increased  New sources of raw materials have been discovered  New and better plant & equipment have been made available on farms and in factories and mines  Better education and newly acquired skills have raised the productivity of labour force  New kinds of natural resources have been discovered like alternative sources of energy III. Economics also deals with the factors, which in the past, have led to sharp fluctuations in the rate of utilization of resources.  Resulting growth in production and income has not been smooth.  There have been periods in which output not only failed to grow, but also actually declined sharply ( Corona Pandemic 2019).  During such period, factories, workers and other productive resources have remained idle due to insufficient demand. CA Hardik Manchanda Important Points to Remember !!  The term Economics is derived from the Greek word ‘Oikonomia’ which means household.  Till 19th Century, Economics was known as ‘Political Economy’.  The book named ‘An Inquiry into the nature and causes of the Wealth of Nations’ (1776) usually abbreviated as ‘The wealth of Nations’, by Adam Smith is considered as the first modern work of Economics.
CA Hardik Manchanda 6/16/2023 Avyukt-Economics Notes 4 Why to study Economics? Economics will enable us to develop an Analytical approach that helps in understanding and analyzing a wide range of economic issues. Economic issues such as:  Change in the prices of individual commodities  Economic prosperity and higher standards of living of some countries despite general poverty and poor standards of living in others  Some firms making extra-ordinary profits while others close down Economics would also provide us with a number of models and frameworks than can be applied in different situations The tools of Economics assist in choosing the best course of action from among the different alternatives course of action available to the decision maker. However, It is necessary to remember that most economic problems are of complex nature and are affected by several factors, some of which are rooted in Economics and others in political set up, social norms, etc. The study of Economics cannot ensure that all the problems will be appropriately tacked But, It would enable a student to examine a problem in its right perspective and would help in discovering suitable measures to deal with the same.