Notesale: Turn your study into money

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Hello friends

Economics is major subject for commerce students
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I am writing these notes by using only important information without
include unnecessary details to make the chapter large
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For easy remembering I have highlighted all the necessary points
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If you are using these notes only for additional purpose than I have used # hash tag point which
denotes important point which need not to be avoided
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Economic theory
There are 2 methods of economic theory
1
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Let’s take an
example
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Ram who is also a man also purchases less quantity of gold at higher
prices
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This method assumes that
behavior of general public will also be the behavior of individual person
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2
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For example if Ram as a single
person purchase high amount of wheat at lower price
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This method is applicable for rent, wages, and interest
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Definition of terms- The terms used must be clear and defined
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For example if theory is
about national income then word national income means it is taking about income of all
citizen not for single citizen
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Process of logical reasoning- There must be logical reasoning and analysis for the
assumptions made
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3
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It is
easy predication that demands for coolers and air condition will fall in winter season
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Testing of theory- Economist is required to test his theory and prediction
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If testing reveal result is same in the entire test, the
conclusion is accepted as economic theory
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Economic problems
1
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Human want are unlimited
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2
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In case of
shortage of funds the main focus of human is on food, health and shelter rather than
television, bike, holiday music tour
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Limited means- Unfortunately resources are limited to satisfy unlimited wants
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Example every
university has limited courses seat for unlimited numbers of student applying
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Means have alternative use- Means are not only limited but they also have
alternative uses
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Central problem of economy
1
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Economy has to decide what to produce and to
what extent
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How to produce- Next problem arise is what technology should be adopted for
production
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Industry has to
decide between automatic and handicraft because each method has its own pros
and cons
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Consumers may be financially weak or may be rich
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Full utilization of resources- Means of production are limited so they should be
used carefully
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3
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# Production possibility curve
In simple word production possibility curve show that various other type of
product that can be produced with same resources and technique
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In this case
if we want to increase the production of particular product than we have to
reduce production of other product
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Production possibilities
A
B
C
D
F

Coffee
1
2
3
4
5

Milk shake
15
12
9
6
3

So this is our production possibility curve
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At these point
the resources that are milk is utilized to full capacity of production of either coffee
or milk shake
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Any point from A to E is best combination of full employment or utilization of
resources
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The right shift in curve depicts growth of resources
(milk)
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Economic laws have tendency- Economic law like other law have cause
and effect tendency
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2
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It may not be applied in every situation with exact same
result
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For example
demand for luxury item of each country is different even for same class of
consumers
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Economic laws are relative- Economic laws have direct relation with time,
place and situation
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Change in time, place and
situation make them ineffective
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4
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Scientific testing of laws on human cannot be done
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For example human body can not be tested for demand
pattern
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Few universal laws- Some economic laws enjoy universal acceptance like
scarcity of factor of production, unlimited wants, laws f demand and supply
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