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INTRODUCTION TO INDIAN ECONOMY 1.1 DEFINITION OF ECONOMICS PRESENTED BY AYUSSH SANGHI
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DEFINITION OF ECONOMICS It can be defined as the science of logically oriented human beings: Owith Unlimited wants o Limited resources
DEFINITION OF ECONOMICS Through the term "Limited Resources" we can also understand: o Scarcity - Limited in number Choice How to Choose? The limited or scarce resources available with an individual forces him/her to make a choice among its unlimited wants and choose the one he/she prioritizes the most.
EXAMPLE O A 8 year old girl goes to the market with Rs. 10 note in her pocket. With this money she wishes to buy: o a pencil, o eraser, o pen, chocolate, e candy o When she reaches the shop, she realizes that all the above-mentioned items cost much more than Rs. 10. Thus, now she has to make a choice about what to buy and what not to buy. Study of these choices is economics.
ECONOMICS CAN ALSO BE DEFINED AS Economics is a behavioural or social science The study of how individuals and societies choose to use the scarce resources that nature has provided to us. Hence in entirety, "it is the study of how people 95 make choices."
WHY SHOULD ECONOMICS BE STUDIED? Think as an individual and not as aspirant. When you're given right to choose with limited resources you would want to know how to use those resources in the best possible manner. Hence the most fundamental reason for studying economics is Opportunity Cost.
WHAT IS OPPORTUNITY COST The decision to give up on something and choose something else is o The cost of making a specific choice includes what we give up by OC. not making the other choice. The best alternative we choose and the others that we forgo, or give up, when we make a choice or a decision is called the opportunity cost of that decision. o This concept applies to individuals, businesses, and entire societies.
EXAMPLE Roman has three choices in front of him: to start his own entrepreneurial venture, o work with GOI as an IAS Officer or Join AllMs as a Doctor. The three choices are in his order of preference. o Thus, Mr. Roman starts his own venture. The cost involved in making that choice is not only the cost of setting the venture, but also the cost of forgoing his IAS/ Doc dream. This cost maybe calculated in terms of the salary/ respect received in IAS/ Doc. inASDo.calltd