Chapter 1: Introduction to Economics | Ash Narayan Sah | Skillshare

Chapter 1: Introduction to Economics

Ash Narayan Sah

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10 Lessons (1h 24m)
    • 1. Introduction

    • 2. Definitions of Economics

    • 3. Nature of Economics

    • 4. Positive and Normative Economics

    • 5. Methodology of Economics

    • 6. Scope of Economics

    • 7. Types of Economic System

    • 8. Fundamental problems of an economy

    • 9. Solution of basic problems by Planning

    • 10. Solution of basic problems by price mechanism


About This Class

This course provides basics of economics. The course helps you to develop understanding of economics in a very simple way. The simplicity is the highlights of this course. The course includes: intro to economics, definitions of economics, nature and scope, positive and normative economics, types of economic systems,fundamental problems of an economy, solutions to fundamental problems. 


1. Introduction : Hello, dearest students myself. Doctor, answer In this lecture, I will be discussing introduction to it Momix definitions in the school. In this lecture, I will be covering introduction under which I will give a brief review off. How do economic ideas have evolved over these, then under definitions. Off it, Momix, I will discuss three states off or definition on. We will drive toe arriving the most accepted definition off economics. Then I will take a nature off Momix. Andi will try to find out whether economics comes under science subject or it's enough. Then I will be discussing the meaning off positive and normative economics on. After discussing that, I will pick up. But you lose your economics. Okay, So what is the Method? Alozie off economics. What is the proof? Caesar adapter for analyzing any economic problem in the scope of economics, I will discuss broadly divided into took it. It is like microeconomics and macroeconomics on the meaning off these domes in economics. Then I will take up a types off economic system under which I will discuss ballistic anomie , centrally planned economy or socialistic alone and then mixed economic. A combination off Peter's onboard tapes off. Then I will take up a phenomenal problems off an economy whether capitalist economy or U. S socialist economy or it mixed it The moment all economies is certain dynamical problems. Onda. We will drive toe finally work out while the solutions to visit problems of economy can be found out. So in this lecture we will be discussing introduction to economics. A little sticker economics is as old as humanity. The war is not the world. Economics is from breed words or you goes meaning the house and normals Men's to menace. Does it implies house or menace mint. So the meaning off economics is household of my amazement on a menacing economy is like menacing a household. Or, let's say business. The history off economic ideas are thought has been sipped by economic problems themselves . New cushions have falls. Economic ists, toe res, full new answers and picnics in M C and Samaria The Bologna China Is it these Rome on India , people tried toe, understand and improve economic process. Plateau and honest oodle analyzed production and values it sound length more than 2000 years ago. Economic problems like production money in dressed rates, monopoly power etcetera were debated by the the analysis Waas primitive on the from 1600 to 1750 the dominant economic doctrine waas mark in Dallas. They believed that economic willed economic world waas him or did manly in resist matters. Who's poses, um, by the state? Help toe in large military and misled Do a mass world states lad on access and dread restrictions that WAAS advocated by market mark in Delhi's Feuz cracks aftermarket journalism. Physical attacks are good against a mercantile V, they stressed that will tease economic diversity rather than go Adamis Mitt and is the will prop nations of list in 17 76 is the first dies on the science off economics he borrowed Isaac Newton's self regulating Mitchell border on applied toe economics are invisible. Adam Smith, believed in the invisible Hands that God wants the market and propounded is This is the next significant contribution to economic idea. Waas, given by David regarding in his book Principles Off Economics and Taxation, who is Waas for list in aid Insel nd. He popularized the concept off economic rent and they loved the theory off related prices and created basic analysis. So in the mission of the third important economic thinker and writer yourself Red Mass. He developed the microeconomic his famous book Principles Off Economics, which was published in 18 99 Analyzed Cost, Productivity, Demand and Output and Competitive Month. Post Second World War has seen the birth and Reppert Group off developmental economics part off macroeconomics, emphasising the economic group on development as an off suit. Off this, another school, concentrating on the costs and limits of growth, has also developed in this suspect. The necessity waas taken by all in dimensional association off in the still lists and scientist known as global at the request of pioneering work was done, among others, by Jade of Lou Forrester and Deal Nadu's Off A Might their revolt. The Limits Off Group 1970 do with first published in 1972 marks, the Big Ning off a new intense debate and discussion between okay, over growth persists. It's a bad on the other Postwar development in economic thinking is, you know, in quantitative area subsidies like mathematical economics, economic legs, you know where become prominent subsets on important papers which is required to do any. I only work in economic currently issues like globalization, outsourcing, foreign capital, global warming, terrorism, our measure, economic issues that has compiled prominence in policy formulation. Agnes now in. So this is how the idea off economic thinking or economic ideas God saved with time looking , think. 2. Definitions of Economics: I love my idea. Restaurant after discussion. A brief history off how economic ideas have developed over the years. Now let a stick of definitions off it moments. There are broadly three sets off, so definition off economics go on. Well, the definition off. Economics, welfare, definition of economics. A scarcity definition. Off economics. We will be discussing these definitions off economics one by one Adam Smith in his book. An Inquiry Into the Nature and Causes Off. Well. Top nations defines economics as the science off world. So, uh, economics is a science off Andi, he says. Already Cal Economy Political Economy considered as a branch off science off states, man or legislator proposes two distinct objects. First, to provide a plentiful revenue or subsistence for the people or more properly, enabled them to provide such revenue or substance subsistence for themselves. And secondly, to supply the estate are common will. With the revenue sufficient for the public services, it proposes to enrich both the people and the sovereign. Our political air, another economic ist off. You know that time J. Smith, he says, political economy profess to teach or investigate the nature off world and laws off its production and its distribution. So according to J s mill economics bill, sweet production off world consumption off world investment Off world and distribution Off world among members off society. So that is the meaning. Go. You know, economics. Now let us look at the main feature. Soft the well. The definition economics is the study off. Well, Tom, it deals with the consumption. As I said, production extends and distribution off. Well, in a country or in a society Onley material commodities constituted willed, which are scarce and useful. Non material and free goods like Aaron water are not well according to wealth definitions. Third important point is economics studies the causes off wealth changes, which means economic growth. So to increase willed production off material goods will have to be increased according toe their view or according toa abuse off Adams meet. Just smell there with Ricardo. Okay, so to have more. Well, okay, production off material goods has to be increased. Okay, Now coming toe Another definition off. Economics card welfare. The definition off moment. You know, Adam Miss Miss definition off economics is the science off. Will waas criticized heavily and it was regarded as a dismal science. You know, you know, high impasses given do well, respect okay by this discipline on because off these economics as a discipline waas severely criticized by the intellectuals off that time some, you know, intellectuals went to the extent and don't did as a bastard signs braiding border signs. So such type of, you know, Haas criticism level against economics in order to save economics from innocent civilian criticism. Alfred Marcel's in his elements off economic. He tried toe, uh, save this discipline from civil criticism. Andi tried toe emphasize or tried to give more emphases to human welfare than with. And according Toa afraid, Marshall, the definition off economics is given like economics. Is the study off Mangga in the ordinary business. So according Toa afraid Marcel's it is a study off mankind what you and me do from 9 to 5 in our ordinary business off light. Okay, toe unlovely. It examines that part off individual and so selection, which is mostly connected with the attainment and use off McGreal requisite stuff will be. So how we, uh, try to get, you know, um, material things in life and how we use it for our okay? well being. Thus it is on the one side study off world and on the more important side, a part of this study off mankind or human so that this is welfare definition. Off economics There are economic ist like a c p Gu Edwin Canham, Sir William Avery's supported the welfare definition on man Feature Soft welfare definitions are given as follows according to welfare definition Off economics Economics is a study off mankind. Okay, so economic system is the economic activities off man which are concerned with material welfare. Okay, then, second important point is ordinary business off like an ordinary man works mostly on will and the Spence is earning to get maximum satisfaction off economic sister, these economic activities often end It also focuses on a study off individual and social economic sister these man not in isolation but is a member off social group. It s studies the personal and so selective with these off human being which are concerned with his material welfare study off material welfare. Another important respect off welfare definition economics is a subject which studies the welfare off man which is off the material day, the study off nor material welfare is outside the school now after well, the definition we will be discussing a scarcity definition of economics are Lionel Robbins in Hayes. And they say, on the nature and Significance Off Economic Sign, which he published in 1931. Criticized, Afraid Marcelo or he's normative you off economics on the definition off economics provided by Lionel Robbins. Okay, which I'm going to discuss now is considered even today as the most accepted definition, most accepted and scientific definition off economics today. If somebody asked you What is it, Momix? You can safely give this definition of economics, okay? It is the most accepted definition of it. So according to Lionel Robbins, economics is a sign which is studies human behavior as a relationship between unlimited aims and scarce minutes which have all eternity used. So from this definition, you can Islamic away There are 34 words which are very in justice, human behavior. Economics is the science OK with the studies human being human behavior as a relationship between unlimited ones. You and me. Okay. All have unlimited ones. Once you satisfied 11 the next way. Crop up immediate and there is no and do this not only this once are different in their intensity off. Some wants our morals and and needs to be satisfied immediately. For example, your semester feet it's isn't They're Steuby. They'll on time. Otherwise you cannot attend classes. Okay, so this is absent. Suppose somebody notes with an accident. He needs medication immediately. He needs treatment immediately. And this one cannot be post for. However, tell us you want Oh, by new bike to may cost you. Let's say around one lakh or to Luxor. Five lakhs rupees. Several years. You don't have money now with you, so you can post for this one. Okay, let's suppose you don't have money now. You cannot buy now then. Okay. I will have my new bike in next semester or in next six months or in next year. So wants are not only unlimited, but they differ in intensity off. So, uh, this is a very important thing on for the first time pointed out by Lionel Rob Second, Indo important respect off this definition is well, once are unlimited. But resources to satisfy those ones are limited. Had there been unlimited resource is there would have been no economic problems and only this limited resources. Whatever limited resources we have, they are okay having alternative use. Same 100 R ₹1000 can be used for, you know, buying a notebook and same 100 or ₹1000 can be used for watching in new. Okay, so this thing is like an individual society or the country as unlimited ones that resources to satisfy the warrants are scarce or limited on. The problem is these limited resources have alternative uses. So every time we face problem off choice. So this is the definition off our This is scarcity definition offic Momix provided by Lionel Robbins Onda. This definition, as I said, is most accepted and scientific issue our definition off moments even. Okay, we have already discuss, you know, main features off Robin definitions. As I said that economics deals with, you know, human behavior. Another expect softest definition is unlimited once or ends on once are not only unlimited , but they differ in their Indian city. Okay, resources to satisfy once are limited. Okay? And I said had there been unlimited sources, they would have been no economic problems on these limited resources have alternated use. Ah, one another respects off Lionel Robbins definition is that neutral? Goodwin wants economics is neutral between once or ends, and economics is suspected to be indifferent. As to the end, he cannot pass Zez mints on the most appropriate uses off the means for reaching the end stamps. The economics is free from values of his really task is to indicate how the means at one's disposal can be used to attend those ends in the best possible way on Do you? No problem. Op juice. Uh, guys, I told you that while the ones are unlimited and sources to satisfy those ones are limited Onda. These limited resources have alternative uses, so every time we face a problem off just now coming to what the score, modern or growth definition of economics. Robbins Landon Robbins Definition excludes from its purview the problem off economic growth it takes them and fairly static. You often essentially dynamic problem Professor P. Samels and give more than or growth definition a growth definition. In his book Economic according Toa Samuelson, Economics is the study off how name and productive resources society choose whip or without the use of money. We employ scarce, productive resources, which could have alternative uses to produce various commodities off and distribute them for conjunction now and in the future among various people and groups off society. Okay, so this was the definition provided by Be Sammons. Just look at the men piece of soft Samels in definition like Robin's Samuelsson has a stress. The problem off scarcity off means in relation to unlimited. Once, unlike Robin, Simonson has made his definition dynamic by including the element off time in it. The main thing about Sammons and definition is that it deals with the problem of choice in its anaemic city. Economics is considered as the study off location, off scarce resources and off the determinants off income output, employment and economic group. The growth definition off Samuelsson has also a universal appeal. It is applicable to all sorts off economics, past, present and future. The growth definition also transcends all ideological differences. Being equally applicable. Toe up the list socialist and communist and mixed economic because the problem of choice in its dynamic sitting arises. This is all about various definitions off economics. Onda under definitions off economics, we discussed mentally three sets off definition, uh, where to score wealth definition off economics will fare definitions off economics and scarcity Definition Office Economics given by Lionel Robbins In this lecture, we also discussed grow definition off economics given by Professor P. Samels Onda. Uh, so I hope the meaning off economics is now clear to you. Okay, Thank 3. Nature of Economics: Hello, my dear restaurants. In this lecture, I will be discussing about nature off economics and will try toe find out whether economics is the science are it's a not before we glove economics under science are under art subject . Let us first define What do you mean by science? Science is defined as a systematic. We're finding no Elise derived from either observation or experimentation in order to find out the nature, off matter or a problem or a cinnamon. Okay, so science is basically a systematic way off finding new knowledge. The scientific unquiet e is comprises off the following steps. Defining theory, our problem or phenomenon. Toby. A study in Clear Cut Man next to Stevie's hypothesizing the probable relationship between the main factors relating to the Veneman or relationship treatment. Relevant variables from the hypothesis, predictions or conclusions about the phenomenon. By deductive reasoning, I will tell you what is deductive reasoning when I will discuss Mattered Alozie off economics. Yes, the predictions or conclusions off the theory using extra data or observations if conclusions drawn are not proved, then go back to a step to in order to improve the theory by specifying another hypothesis So this is the methodology off scientific inquiry sciences such as physics, chemistry, etcetera. Follow the evolved matter off inquiry in orderto discover new knowledge. The big question is, can we put economics in this? Kept getting in physics? We have studied the behavior off matter, which is inanimate or non living things. Andi. It saw the stable response when a studded with scientific matter as discussed able. Okay, so the subject matter off physics is visually non living things. So curies or physical sciences. So a stable relations do toe homos unity off the object under district. Okay, however, economics is a discipline study the behavior off human beings Whose is any made living? However, periods off social sciences says, Is it Mom? So Celozzi? Political signs do not so stable relationship like a stable relationship founding theories off your senses. This is because off high presented e off behavior off the animated body either human beings . However, uh, most of the universities, uh, provides, you know, embassy in economics on more and more people are it is perceived as a ah science observed. Now it is because you know, after second World, you are wanted really respects off economics has developed over the years. Now you cannot amazing career in economics without sound knowledge, off mathematics and statistics influential list artist. So, uh, signs are no doubt uh, like pure sciences. Economics cannot be gloved, uh, or cannot be said that it's a pure science, like physics or economics. Economics isn't on. Art is a skill of how to do it. While science tales has to understand the phenomenon and are tells us how to do it in economics has definitely and expect off. And this is reflected in normative economics, where a society based on its value system prescribes norms to tackle its economic problems and guide economic policies. There is clearly no mathematical formula for successful management off an economy or a business. No doubt, your is my guide, the decision makers. But economic decision making is not entirely a sense. Rather, we can see it is having pizzas are both science and arts. Okay, so, uh, in this lecture, we try toe, find out whether economics is the signs or it's in a on. We came to know that economics has elements off boat science as Willis Art Book. Thank 4. Positive and Normative Economics: Hello, my dear restaurants. In this lecture, I will be discussing about positive and normative economics, and we'll try to know, What do you mean by positive economics and not making it positive? Economics can be done. Does what is what Waas. What will be a positive economics deal? Suit statements like, What is the growth heard off US economy in 2015 and six? What is the inflation rate running correctly? And in Indiana, this type of economic analysis is free from that loser and emotion has no place in objectivity. So was positive. So it is objective in nature, not subjective images. Let us look a few examples, and then we will come to know the nature off positive arising aggregate household demand well, because the rise in the general level of prices if economic is already operating at full employment, economic incentive in the form off lower corporate excess may enhance the performance of the Indian economy has grown at the read off 6% in the last five years. Inflation in India is basically supply side, so these are some examples. So all the diverse statements or facts. On the other hand, Normandy of economics can become does what ought to be This type off economic analysis is hello, laden and subjective inmate. This type off economics plays an important rule in formulating economic policy. It is in a league aided by a loose system of a society and tries to fix economic problems according to their thinking or idealised. Following are some examples off normative statements Foreign direct investment every year in the deal sector in India by government is not a wise decision and should be taken back. So without ever d I is good for retail sector in India or not, it's debatable. Did our some merits Andi made IDs? Oh, this economic policy on it can be debated and section of people are saying that every I is not in the interest off, you know, small Raiders in India. Reducing subsidies on petroleum products by the government is going toe into the work with love India, so subsidies should be continued crisis off patrolling diesel should not be increased are high because it's going to affect most of the RV leak. Last people are most of the I would government must pay attention to the agriculture sector off India, so these are called normative it moments. No. Okay. Our rule list. So I hope the meaning off, uh, positive economics on normative economics now must be clear to you. Onda. In this lecture, we tried to understand the differences between positive and normative economics. Okay, Thank 5. Methodology of Economics: Hello, my dear restaurants. Welcome back in this lecture I will be discussing about that sort of luxury offic Mom, what is the process? Are mattered Alozie or doing economics or analysing economic? The cables are doing RND. So what is the matter of finding new knowledge in all sciences? Grow through the development off TD's. Every science has to adopt certain Method Alozie or deriving principles, laws and theories which may help in studying that science. It theory tries to explain the behavior off phenomena under investigation. Economic theory also attempts to explain the area of economic variables. Deals with Lycos economic signs tries to explain, say, for example, the following things. Why are some countries more developed than other countries in this world? Why are still electricity boards of various states in India making losses year after on on other hands? Roberts said. Companies like that a power or torrent power off B s years are making problem. Why is rupee appreciating against major currencies of the world in the sometimes on what is its implication or, let's say, importers and exporters? What are the causes off high inflation in India during last for five years, economics uses scientific matter toe answer. They evolved and similar type of. There are basically two matters that are used for you're rising in economics. Emily did that mattered on in the people. Now we will discuss what is deducted matter and what is in the Let the matter is that mattered where generalization is done from general this mother except seven universal fruit as the basis or as exam using this universal group or exam as a base, it tries to arrive at a conclusion about the particular even through this. The basic idea behind this matter is that if something is true for everybody, then it will be truthful and individual. Us. This matter is also called a bribery matter or analytical off. For example, man is not this weekend do reasoning like this. That's a P is also mortal because it easy So this is deducted matter where we try toe generalize or generalization is done from general. What is true universally is also true for these. Okay, let us go for in that In this matter, listening is done from particular to sin. So please remember this from particular to gender. What is true for an individual? It is also true for the hosts. A site that's this matter desist. Oppose it off detective map in in that matter, on the basis of experiments and observations, economic laws are so this involves election off detailed data on some economic problem. After the collection the researcher tries to arrive. It set an economic loss and principle based on analysis of Does This Matter makes reasoning from party, for example, FBI in multi brand Riddell is good for Indian economic. All the ruling party's is there. FBI is good for economic and who will help to create a run. However, the Medicine party says that the FDA, in my brand retail will result in Latin skill How to settle this wish? This requires collection of data and analysis of data, and then one can still rise on the I. So in this lecture, we tried toe understand the method Alozie off economics on how theories in economics are developed by employing both the matters or the let the matter off reasoning and inductive off, it isn't okay, Thank 6. Scope of Economics: Hello, my dearest students, Welcome back in this slick sir, we will be discussing about scope of economics before the Great Depression off 19 thirties economical analysis Waas studied under the name people are gonna frisk first novel prize winner in a moment was the first person to classify economics into microeconomics and macro . However, with the publication off the general puree off employment interest in money in 1936 macroeconomics must it must as a separate branch of the moment. Since then, economic analysis is broadly classified into, uh, microeconomics and Metro. Let us discuss what is micro moment. Micro means small. This micro economics studies the behavior off in the diesel units such as individual consumer, on individual producers. This tries to study the following questions How an individual consumer maximizes is satisfaction. However individual producers maximizes is her total output or production? How an individual produces producer minimizes its cost of production are how he or see tries to maximise silt. Self starting over. A total revenue off is a farm. How the price off An individual commodity says this cauliflower Is it for me how the price off an input are a factor of production says the level is too. So the subject matter off microeconomics is individual units individual, consumer, individual producer, individual commodities. I hope the meaning off microeconomics must be clear to, you know, let us discuss What do you mean? But macroeconomics? Macron in slots. This macro economics studies the behavior off not individual units, but behavior off all the individual units together. Either the point off time or over it is this study off Agree, Gates. It is not the study off individual demand, but they aggregated the months off all individuals, not individual supply, but creates in macroeconomics. We do not study the individual price automoviles handset For the general level uprise prevailing in the whole of the subject matter of macroeconomics includes the for long macroeconomic, very close the mystic per economic fluctuation or this is the site Red State aggregate employment in the level of prices are inflation. Aggregate saving capital formation in a restaurant, fiscal and monetary policies in the national trade and extensive objective off macroeconomic analysis is to understand how the economy off the country are how the whole world economy works. So, uh, in this election, we discussed broadly the scope off economics now the scope off economics oh is has widened over the years. Apart from microeconomics and macroeconomics, there are many branches off. Ignore, for example, mathematical economics, economic Briggs Want to get it mattered. Sin economics, involvement The economics, health, economics, money and banking. International trade, international finance. And as the economics, How about economics? They are many branches off moments you can find toe. Okay, on the scope off. Economics has really, you know, Wyden notice. But as I said broadly, economics can be Are the scope of economics can be divided into microeconomics And macro moment and we have already discussed or the subject matter self microeconomics and okay. Thank you. 7. Types of Economic System: Hello, dear students, welcome back in this lecture, I will be discussing about types off economic system prevailing in this world. There are basically three types of economic system, namely after list economic, communist or socialist economy and mixed ago. No. We will try to discuss the main features off at ballistic anomie, socialist economy and mixed economy one by one. So that's you will be in a position to make, uh, difference of it when, let's say U s economy on economy off Cuba or, let's say, economy off South Korea and economy off North Korea. So that is the objective off this election. So what is capitalistic? A home? Have a ballistic Anomie are market Economy is a type of economic system where the means of production are factors of production, says the land, labour, capital and enterpreneurs, our own control and operated by private meaning. You can have your personal property. You can have your personal bank violences. You can have. Let's see your personal car, personal house. So that is the meaning off private ownership off resources in this type of economy, production is guided by mainly profit motive. Okay, so the guiding force for any that would be is profit. Unless you are, uh, unless you get incentive toe on profit, you will not carry out production. Now, coming toe men features off market economy. As I say, uh, the most important feature or private are a market economy is private donors see over the means of production Second, more devious profit more. Although the seasons are generally guided badder profit motive What do produce, uh, how to produce for home to produce. Okay, All these decisions are guided by perfect in this type of economy. Non indifference off government region. Really fine. The government does not interfere in economic activities. That means companies are free to decide what to produce, how to set price, how to market their product, okay, and how to use their unless, say income. So, in economic activities, gunmen does not interfere. Okay, Onda price mechanism. Uh, many horses are market forces, forces of demand and supply guides all the season. Okay. How do we locate a limited resource is okay. How do you reduce our which technology will be used for production? Okay. And how to distribute, let's say, produced good sense services in society. All these dis aggressions are settled by market forces. That is, the forces off demand and supply not going toe socialist or were the score centrally planned economy? Centrally planned economy is a type off economic. We're Menzel production our own control and operated by the gun. Okay, so you can find the difference between a market economy and centrally planned economy. Okay, This type of economy is also known as socialist economic. The government organization The government organizes all economic activities and distribute various goods among the consumers. On the basis off it's only seasons. So who will get what from, Let's say nationally will then are good sense services produced that will be decided by a government or central planning authority. In this type of economy all the seasons like what to produce, how to produce and for home to produce. Article by the central planning generally known, is planning commission on the basic aim is not profit but is to work for social welfare off Whether you do it, it is acute. Ah, social welfare is maximized by this process is inevitable. Question. OK, Onda. So this is the meaning ob centrally blonde now coming to Maine features off socialist economy as I said, stayed ownership. Overman, supper is the is one of the most important feature. So, uh, centrally planned economy, all the means of production lamb, liver capital and her pregnancy are owned by the gun. And this isn't making process. Government takes all the decisions regarding consumption. What? People will consume production. What good sense of Mrs will live. Produce investment and distribution off sensitive Planning commission drag sold. This is the Central Planning Authority decides who are how and for whom to produce. There is no role for market or price mechanism in centrally planned economy. So social Morty is another feature off socialist economy all the seasons aimed to maximize social welfare. Okay, so, uh, these are the differences between, you know, market economy and socialist now coming toe Another type of economic, that discord mixed economy. Today, no economy is 100%. We can say is a socialist type of economy or capitalist economy. Okay, we cannot go. Uh, do you hide economic in watertight like compartment? Okay. Mixed a gun on me. Uh, is a diabolical Normie, which reminds the pieces are vote, market economy and central in mixed economy, both public and private. sectors go sideways. In this type of economy, private sector is given freedom to choose its lines of production and fix prices on the basis of price market. At the same time, the government keeps a close watch on its. So I think now you can make a difference between what is market economy? What is socialist economy and what is a mixed economy? OK, so economics like the US, our country's off euro. Okay, in the, uh, more or less they come under, you know, capitalist economy, because more than 80% or 90% okay, industries are under private. Okay, andare economics like, let's say you like no economy of Cuba or economy off North Korea. These are examples off socialist economic. But as I said, no economy can be said that it is 100% socialist economy or I'm in private market economy. OK, more or less all economies today existing in this world more or less clubbed under mixed economy, where public and private sector goes, I'd say Okay, thank you 8. Fundamental problems of an economy: Islandia restaurants. Welcome back toe basic economics course I am this lecture. I will be discussing about fundamental problems off. In last lecture, I discussed types of economics types off economic systems, have ballistic anomie, socialist economy and mixed. Here we have toe keep in mind that irrespective off the type of economic is, every economy faces certain phenomenal problems or basic problems. According to a recruit, the economic problem is a she usually the problem arising from the necessity off choice joyous off the manner in which limited resources with alternative uses are disposed off. It is the problem off as Henry off resources, so we know that MM limited, like on individual society, has also unlimited ones. But the resources to satisfy unlimited wants are skills. Not only this, these are scarce. Resources are also having, you know, alternative uses on that is why problem Off Choice and Isis. If it's night in his book economic organization, I lighted the basic moving problems off and gave the following five interrelated problems as follows. So these five basic problems are what do produce how to produce or home to produce. If you shouldn't use off resources, economic growth and development. So with it is a capitalist economy or socialist economy are a mixed economy. Every economic has to face these bushes or try to find the answers to discussions. Because visit problems off economy are more or less seem a little stick up for us problem. What to produce an economy having unlimited ones with limited resources has to decide what Goodson uh services has to be produced and in what quantities are to reproduce, whether developed or underdeveloped. The requirements off every economy are unlimited, but the resources to satisfy these requirements are limited and scarce. In this situation, the economy has to make a choice between different groups and services necessities. Whether it has to produce necessities such as wheat paddy pulses was made extent housing, roar, electricity, hospitals, schools and universities. Magicians etcetera are whether limited resources should be diverted in the favor of luxury goods such as cars, luxury apartments BV, while handsets, smartphones, laptops, refrigerators I grew with jewelry are to produce some combination of both types of goods and services. Okay, so this is the problem off. You know what to produce now? Depending on the priority off an economy, the economy, you realize us. It's scarce resources, toe pill food, you know, at the once. Okay, so this is the meaning. Go What? To produce a problem. Now the next question is second. Phenomenal problem is how to produce So second phenomenal problem on economic faces is how to produce goods and services. Does this problem is basically Oceana selecting technical production on there are basically two types of techniques of production level and insist picnic on Capitol Indians. The lever intensive technique or production is that technique where last proportion off labor is combined with, you know, small related lee A small proportion off capital on capital intensive technology or technical production Is that production our technique where larger proportion off capital is combined with ah, a small proportion off labour, for example You know, uh, agriculture sector in us our any other developed countries. Agriculture is basically mechanized where a small proportion off labor is combined okay with capital. Most off the agriculture activities are done using capital are Koopman. So machines OK, so agree control system in developed countries are basically capital intensive in nature. However, in countries like India or less second trees off Africa, their agriculture is basically 11 pence of technology where most of the agricultural activities I bet it out by, you know, using liver. Okay. However, you know, in some states like Punjab Haryana okay, more and more capital are utilized. Now, the decision regarding to selecting a technical production is largely depends on comparative cost off. These two techniques 30 ornamental problem and often economy, uh, basis is for whom produce. This problem is ah relating to distribution of goods and services either national in some off wondered your goods and services multiplied by their respective places. Among members of that economy are and who gave swart from total output produced in an economy is an important problem. The economy off countries would adopt such policies that may distribute total output off the economy in a balanced manner. Neither in paper, off rich nor in people are four sections of the This may prevent economic concentration in the hands off you people. Uh, for example, some survey. So this is that a pretty portion of the resource is off. The world now is concentrated in the hands off 1% on 99%. People are having, you know, control or and roll over rest 50% of the resources in this world. So this type off problem are inequality in distribution, off goods and services or income is serious and has a lot of implications. The economic policies should be oriented words improving the conditions off low income people off port. Phenomenal problem off an economy is efficient use of resources. We know that resources have a level with a country. Our resources of a level with an individual is limited on a scarce on. That is why this is, uh, more important, you know, well, utilising resources. You know that resources off an economy are limited and therefore it becomes even more important for an economic to make use off. All offers have delivered resources most efficiently full utilization or exploitation Off resources means more employment, and more so, no economy allows its resources to lie idle. However, due to certain reasons, many resources remain either unutilized or underutilized. Gosso, unutilized or underutilized resources are enormous. That's it is imperative to identify the reasons for underutilization of resources in the economy on must make efforts to use all every level resources in the most efficient man. Finally, the fundamental another phenomenal problem off an economy is how toe grow at a faster rate on how to sustain. You know, I growth rate over a long period of time. How to achieve rapid and sustained group in total output off. The economic is also considered a basic up 60 or ah, problem off Economic growth refers to the rate at which total physical out book off an economic grows over a period of time. It has a lot of implications for the standard off living for people off country. What is stent? Even the economic growth 3%. It will take roughly 24 years double the standard off living in this context to you. Please remember a rule off 17 on. We are getting this figure by using back room. Even economy is growing at 5% per annum, it will take 14.5 years time to double the standard of living. However, if an economic is growing, a 10% for it will take on Lee 7.2 years Time to develop her started off living off the people of that. And so uh, in this lecture, we discussed various basic problems off an economy on under that were discussed. Problems like what to produce, how to produce or home to produce. How do you realize the sources? Inefficient manner on how to achieve our high economic growth grid over the period off. Okay, Thank 9. Solution of basic problems by Planning: in this election I will take up solution all basic basic problems through planning in socialistic in a socialist economy We're publico, not Cibo Resources exist all her nominal problems off economics I solved through economic learning. So please keeping my government interferes in economic life off the country through Central Planning Authority in India. This has already was called Learning Commission off. So in a socialist economy, this authority takes all the economic the seasons in the socialistic alarm, like a economy of North Korea are Cuban economy or in being now, the first problem first Phenomenal problem, Aziz, we know is what to produce. The Central Planning Authority decides what to produce and in what wanted in a socialistic alarm keeping in mind resources of a level in the country with the objective off maximizing social well fare. So please keep this in mind. In such economy, necessities are preferred over legs cities. Okay, so this is how what to produce. The problem is pickled in a socialist economy. Basically a group of purple decides what income country or what The little off the country will can zoom. Okay, whether you want listen, laptop or smartphone. Okay. All less ism legs. Erica. It's not depend on the choices of people, but central plan. A Central Planning Authority will decide what you will consume. Okay, so that is the problem with, you know, uh, Yemen Socialist economic the next Oprah nominal problem eyes. How to produce The problem of how to produce is also decided by the Central Planning Authority giving in mind the resources have a level in the country. So how to produce or the technology question. He's also decided by the central, if a country is highly populated and providing employment to the people is priority off the nation than related costs off labour or capital is not taken into consideration as opposed to capital. Please system. Often labor intensive technology is used with, if you do provide employment, our looking economic cost consequence. However, if a country is recent capital and capital intensive technology is adopted for production of goods and services or home do produce question in a socialist economic goods and services are distributed according to the nude off, and not by their purchasing power. So please keep this in mind according to the need not by what's is involved. Often central planning on three picks. Decision in favor of capital goods at the cost off. Consumer groups This planning authority things more about future simulations rather than currencies and visions and fear Requirement. Yes, please give while distributing this lingo. Landing authority keeps maximum social welfare and also equal distribution of goods and services. Okay, so this is how for home to produce cushion is settled down in socialist economic efficient use of resources. In this system, a location off resources is made on the understanding up central planning. Other if you will decide the fed off a condom resources off the country in this system with salad for in this system, allocation of resources is made on the understanding off the central planning. If you people decide the food off again, the sources of the country are located in such a manner that social, maximum social maximum social welfare can be inside economic growth and development. The fifth fundamental problem socialist economy use The Central Planning Authority is a tool to bring about high and sustained economic growth and development through economic planning. All the other level resources off the economy are used in the most effective man. That's a socialist economy uses economic planning to solve all the phenomenal problems. A Mexican army like India, where public and private sector support side by side, uses both price mechanism as well is economic plan for solving the basic problems off in Munich? In some sectors, like island gas, electricity, railways, defends bigger Enezi, etcetera? I didn't public sit and all decisions relating to basic problem. So what to produce, how to produce and for whom to produce Etcetera are solved. The economic planning or what is now discord. Maybe you how in sectors like consumer goods like from sadistic I d sector, textiles, media and entertainment, etcetera are left toe price mechanism. That's mixed Economy uses both mechanisms, price mechanism and planning mechanisms for solving the sick problems. So in this lecture no, we discussed how socialist economy solves is phenomenal problems off any are two planning commission or what is called central planning. Okay. Thank you. 10. Solution of basic problems by price mechanism: Hello dear Students will come back to the basic economic schools. In this lecture, we will try to find out the solutions off basic problems often economy or worry scar fundamental problems off all EC economy whether capitalist also spliced are mixed economy face the basic five problems we have discussed in last licks Every economy has to solve these problems somehow are other. Why you capitalist economy a type of economy were private ownership of resources exist so the phenomenal problems often economy through price mechanism a socialist economy where public owner see off resources exist solve the basic problems off economic through economic planning. Now let's see, uh, what do you mean by price mechanism? Because this is the process by which a capitalist economy subs it's basic problems. All the basic problems off a capitalist economy are solved through price mechanism, So please keep this in mind. Price mechanism refers to the determination off equilibrium, price and quantity off all goods and services in a capitalist economy by the forces off demand and supply. So please give this in mind price mechanism is nothing but the forces off demand supply. Now what is demon demand is the amount of goods and services demanded at a particular price during a given period of time. Okay, so amount off quantity demanded at a particular price during the period off that. So these three things must be there in the definition off demand. So demand for a commodity is little man didn't mean by the price off the comedy income off the consumers prices off related goods etcetera demand is in really increases would fall in price of the commodity and decreases with increase in the price off. Good other factors held constant. This is the famous law off the man given by Alfred Morris. And please remember that demand represents the consumer side of the market. Supply is the amount of goods and services offered for sale at a particular price my seller during a given period, so please ah, keep this in mind the definition off supply. A producer generally supply more that higher price unless it lower price does. There is a direct relation between quantities supplied by sailors and price of the commodity. Other factors held constant supply off a good in the market is determined by the price of the good prices off raw materials technology except does supply represents the producer side off the market. So demand and supply forces working off Was it dad ish? The interaction between these two forces determines the equilibrium, price and quantity are demanded off for a community. Now let us see held US price mechanism. Soul, basic problems. Ah, off a covered A list economy. In a capitalist economy where private donors people resources exist, price mechanism plays an important role in solving basic problems off an economy. So the first basic problem is what to produce in a capitalist economy. The consumer is said to be the king, so please keep this in mind. Juma is said to be the king. The producers reviews only those goods and services that are demanded by the condoms. If there is high demand for sport goods, then the producer will produce sports goods. If this year is not in demand by the consumers that it will not be produced by produces. The quantity off goods and services demanded is determined by the population off that particular that's in a free capitalist economy. Consumers decide what is to be produced and in what quantity. The consumer is sovereign in the capitalist economy. However, sometimes joyous off consumers is influenced by advertising, so please keep this in mind. So, no doubt, consumer is king in capitalist economy, but companies are business enterprise. Try to change the taste in preferences off the consumer with the help off a product promotion on advertising. The next basic problem off any economy is how to produce in a capitalist economy, the basic motive all producer is to maximize problem. So please keep this in mind. Okay, so the basic motive or producers to maximize profit. Crawford is maximized Onley if the cost of production is minimized. So this isn't body. If the cost of production is minimized, therefore, a producer will use bat raw materials are technical production that will minimize the cost off its production. Your liver. It's cheap and every level in last quantity than capital. Then producer will use liver intensively. However, if capital is a level evidently and cheaper compared to liver than the capital intensive technique will be used by the that's in the capitalist economy. Austin production and related supply and demand off labour and capital guides the producers in deciding how to produce goods and services in an economic. So please keep this in mind that how to produce cushion is basically, uh, so By keeping in mind Brockett motive on many Malaysian off cost of production in the next problem is ah or home to produce under capitalist economy uh, private donors, people factors of production land, labor, capital and enterpreneurs effective. So keep this in mind this Kidderminster income level of people in the produce is high. These factors of production for the production of goods and services and accordingly, these factors of production gate Rivard That's payments received by factor owners give income to the bill. This income is used for buying goods and services produced by produces. We will have, unless income might be due to less purport get a small same in total goods and services produced either what is called national income up people with higher incomes, my do more property get a larger set in, thus inequality in owner simple factors of production then leads to unequal distribution. Off total output are either national income, so please keep this in mind. So inequality in one or super factors of production way league toe unequal distribution off student out Now the next phenomenal problems off any economy is efficient use of resources in gates off capitalist economy The question off efficient use of resources in a capitalist economy is sold by the price mechanism. Since profit is the basic motive behind any production producer tries to produce a minimum possible cost, which is possible only when producer tried to use all the resources most efficient coming toe. Fifth fundamental problem that is economic growth. Economic growth in the loveman are left toe market forces or what? The score price mechanism in the capitalistic. The price mechanism cannot guarantee your rapid and sustained economic group because in this system, Onley wars, industries off florist, which are in demand on those industries, remained neglected, which are not capitalist. Economy due to this system is characterized by economic fluctuations card business, so that's in a capitalist economy. All the basic problems, often economy, are solved by price. Meghan's