Created By Dr Irfana Samdani M.A, Ph.D., (Economics) Department of Eonomics, Hyderabad , Osmania University Hyderabad, Telangana India and Post Doctorate (Economics), ICSSR. New Delhi, India. Today topic is Introduction to Economics Basic Concepts and Principles

Before studding economic we will also try to understand the subject matter of economic. Economic is the oldest discipline and with the time the study of economic is becoming the need of life. As per Professor Samuelson “Economics is the oldest of the arts, the newest of the science, indeed the queen of social science.” Economic knowledge is essential to understand the society and social welfare. The aim of Economic is human development, its raises the standard of living and in turn increase the welfare of mankind. The knowledge of economics is essential for, business executive. Business executive must have knowledge of economics concepts, tools and techniques to take business decision. In ancient and medieval times economics is used to call Political Economy Since then Economics has developed as the most logical social science the functions of at that time the state were limited to maintain law and order, peace and security. The state also undertake some social welfare functions like provision of relief during the crop failure provision of public utility service etc, In order to perform these functions, the state used to collect revenue and to spend it in such a manner so as to promote the social welfare. Following this approach Indian renowned statement Chanakya or Kaustilya in Arthashastra he examine both kind of activities i.e Economic and Political. It is important to know that the word “Economics” or “Economy” in English language has its origin from two Greek word Okios (Household) and Nemein (Management). This means economics is nothing but managing a household, using the limited money or resources a household has.( remember this it might ask in exam) The origin of the term economics could be treated to the work of Great Greek Philosopher Aristotle who confined the study of economics to the Management of Household and the Statecraft, Acquiring, Guarding and Making Proper use of Wealth. The subject matter of economic teaches the people how to earn livelihood and spend it and when we study this aspect of economy we call this social sciences as the study of economy. Thus economics is the study of the allocation of scarce resources to meet unlimited human wants For example we will live in a society or community if we see around we find every human being doing some work or business Like teacher works in school, doctor give services in hospital, shopkeeper work in shop. The reason for doing this work is simple because man need bread to eat cloth to were and shelter or home to live besides medicine and education in other words wants of a man are unlimited to fulfill this wants he does efforts by doing efforts he get income or wealth and with this earned income he satisfied his want hence economic is a science which satisfied human want or economics is a science which studies the circle of wants efforts and satisfaction. When we earn income we will spend it on purchasing of different commodities, like food clothing and shelter etc when we study this human behavior we call it economy. The basic problem of economics is scarcity of resources means limited resources. Here what is limited resources, limited resources is income. Why we study economic the basic reason is scarcity. Basically human being have unlimited wants and our income is limited to satisfied that wants. One can not satisfied all there wants they have to make the choice among the urgent want and less urgent want. Scarcity means when a particular resource demand is more and its resource supply is less. Because our income is limited and our wants are unlimited then one can all this aspect as income scarcity. For example in a particular area where water supply is less and water demand is more then we call it as resources of water is scarcity or scarcity of water . In an economy petrol demand is more and its supply is less then we call it’s as the resources of petrol is scarce or scarcity of petrol is there in that particular economy. This situation of demand in relation to supply will create economic problem and what do you mean by economic problem. Economic problem is the problem of choice between unlimited wants and limited resources means which have alternative uses. Let’s study the economic problem reasons. They are three reasons for economic problem the first reason is scarcity. As we already discuss that what is the meaning of scarcity its nothing but supply in relation to demand when the demand for a particular resource demand is more and its supply is limited then the problem of scarcity arises. When specks about application of scarcity problem we are not specking about an individual economy. Hear we mean that problem of Scarcity is applied on every economy every organization and every society and every individual. If there is no scarcity of resources the there will no economic problem and there is no need to study the economy at all. The second economic problem is unlimited human wants. Unlimited want means human need are unlimited. As soon as our one want satisfied another want emerges and the new want intensity is more than our first want. But our priorities are more differ than like I have ten liter of water and is felt trusty then I prefer to drink the water than taking the bath with it. Because the intensity of drinking water is more compare to the intensity of taking bath with it. That’s why we say if our need will have equal intensity then we are not supposed to select it. As which want I need to satisfied first. that’s why we say the human wants have differ in intensity and human being try to satisfied those want which have higher intensity. The third economic problem is alternative uses. We have already discuss that our resources are scare and with hat it have alter native uses also. For example if we have fuel like petro and diesel with which we can drive a car and can also run generator as well we can use it to run machinery So because the available resource have multiple uses it’s become very difficult to decide where we have to use these resources. So hear alternative uses mean different use of resources. We have to make the choice between less urgent want and more urgent want to satisfy our need because our resources are limited. With this I stop this lecture and it will continue in Part- 2 of Introduction to Economy. Where we discuss the Central Problem of Economics.