AP Inter 1st Year Economics Notes Chapter 1 Introduction

Students can go through AP Inter 1st Year Economics Notes 1st Lesson Introduction will help students in revising the entire concepts quickly.

AP Inter 1st Year Economics Notes 1st Lesson Introduction

→ Economics is a social-science. It explains how an economy and different individuals behave while managing their economic activities.

→ The term Economics is originated from greek words ‘OIKOS’ and ‘Nemein’.

→ Economic problem is concerned with economising scarce resources. Wants, efforts and satisfaction constitute the essence of economics.

  1. Wealth definition – Adam Smith
  2. Welfare definition – Alfred Marshall
  3. Scarcity definition – Lionel Robbins
  4. Growth definition – Samuelson
  5. Jocob Viners definition – Jacob Viner

→ Modern economists have divided economic theory into two parts,

  1. Micro Economics
  2. Macro Economics.

The two terms were first coined and used by ‘Ragnar Frisch’ in 1933. Micro Economics was popularised by Alfred Marshall, J.M.Keynes popularised AAgcro Economics. Both approaches are essential for proper understanding of a problem. The two approaches are interdependent.

AP Inter 1st Year Economics Notes Chapter 1 Introduction

→ The method of studying economic phenomena by taking assumptions and deducing conclusions from assumptions is called deduction.

→ Inductive method is the process in which one can arrive generalisation on the basis of observed facts.

→ Economic static – analysis where establishing the functional relationship between two variables whose values are related to the same point of time.

→ Economic dynamics is the study of in relation to the preceeding and succeeding events.

→ A positive science may be defined as a body of systematized knowledge concerning ‘What is’.

→ A normative science may be defined as a body of systematized knowledge relating to the object of “What ought to be” ?

→ Anything which satisf ies human want is good.

→ Goods can be divided into two types :

  1. Free goods
  2. Economic goods.

Economic goods again divided into two types :

  1. Consumer goods
  2. Capital goods.

Semi finished and under finished products are called intermediary goods.

→ Wealth means money but in Economics all economic goods including land is treated as wealth. Wealth has three characters,

  1. Utility
  2. Exchange value
  3. Transferability.

AP Inter 1st Year Economics Notes Chapter 1 Introduction

→ Income is a flow over period of time. Income flow is the circular in character. There are two types of incomes,

  1. Money income
  2. Real income.

→ Wants satisfying capacity of good is called utility. There are four types of utilities.

  1. Form utility
  2. Place utility
  3. Time utility
  4. Service utility.

→ Value means the exchange value of good in economics. A good has value in use and value in exchange.

→ The value of a good expressed in terms of money is its price.

→ Human wants are starting points of all economic activities. They are unlimited, competition, complementary and recrur. Wants are classified into necessities, comforts, luxuries.

→ In Economics welfare means utility of satisfaction. Welfare indicates better living conditions of people in the society. Wealth and welfare closely related to one another.

→ Economics is a social science which studies how the society uses its scarce economic resources for the satisfaction unlimited human wants and for optimising net social gain.

→ The term “Economics” is derived from two Greek words “OIKOS” and “NEMO”, thereby meaning “Household Management”.

→ According to Adam Smith, the father of Economics, “Economics is primarily concerned with acquisition and accumulation of wealth.

→ According to Alfred Marshall, Economics is a study of mankind, consisting of individual action and social action which aims at attainment of material welfare.

→ According to Robbins, Economics is a social science which is concerned with productive and optimum utilization of scarce economic resources for satisfying unlimited human wants through rational choice making.

→ Samuelson’s definition of Economics is a broad based definition of Economics as it emphasises on aspects like economic growth, scarcity of resources, choice making, past, present, future, production, consumption and equitable distribution of income/wealth.

→ According to Jacob Viner, “Economics is what economists do”.

→ The subject matter of Economics is broadly divided into Micro Economics and Macro Economics.

→ In Economics wealth means all economic goods which have the characteristics like utility, transferability, scarcity and exchange value.

→ The two methods of economic investigation are 1) Deductive Method and 2) Inductive Method.

→ Any good which is used by the consumers directly and which satisfies the wants of the consumers directly is known as consumer goods.

→ Any good which helps in the production of consumer goods or some other goods is called producer or capital goods.

→ Goods which are half finished and are in the process of production are known as intermediary goods.

→ All man-made goods, which command a market price and whose supply is less than their demand are called economic goods.

→ The want satisfying power or capacity of any good or service is called utility.

→ Micro Economics which is the study of the smallest part of the economy was popularised by Alfred Marshall; It is also known as price theory.

→ Macro Economics which is the study of-the economy taken as a single (whole) unit was popularised by JM Keynes. It is also known as Income and Employment theory or Aggregative Economics.

→ The term free goods refers to all goods given freely by nature to the society as nature gifts.

→ Deductive Method is such a method of economic analysis/investigation in which (specific) particular laws of Economics are derived from general human behaviour.

→ A method of economic investigation in which generalisations (general statements) are made basing on particular or individual experience is known as Inductive Method.

→ A type of economic analysis in which the all economic variables of the equation belong to the same point of time or same time period is called Economic statics.

→ A type of economic analysis in which the economic variables of the equation belong to different time periods is known as Economic dynamics.

→ Economics is considered as a positive science because, Economics, like any other positive science, deals with “Cause and Effect” relationship or what is?

→ Economics is also described as a normative science, as Economics is a social science like any other normative science, deals with “what ought to be” or prescribes socially desirable solutions.

→ The amount received by people, whether in terms of money or in goods, by the people and factors of production through their productive efforts and through the sale of their services is known as Income.

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