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Economics

Presentation prepared by

Abhilash Alphonso

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What is meant by the termEconomy

Production.Consumption.Exchange.Distribution.

Saving .Investment.

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Why Economic is studied ?

To deal with the economic process. To understand the economy, economic

system and economic function.

Gives knowledge to know the politicalproblem that affect us.

Give knowledge to the government, how to

frame the budget. Helps labour leaders to solve the labour

problems.

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Areas of economics are classified as

follows:-

1. Micro economics & Macro

economics.

2. Positive economics & Normativeeconomics.

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1. Micro economics and Macro economics.

Micro economics:-Micro in Greek language means small.

In micro economic the part of the component of the whole

Economic are studied.

Thus the study cover chiefly:--

(i) Product pricing (ii) Consumer behaviour

(iii) Factor pricing (iv) Economic condition of asection of the people

(v) Study of firms (vi) Location of a industry

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i) National income and output.ii) General price level

iii) Balance of trade and payment

iv) Aggregate production, consumption etc.v) Saving and investment.

vi) Employment and economic growth.

Macro economics:-Macro in Greeklanguage means large. Macro economic isthe study of the economic system as awhole.

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2. Positive economics and Normativeeconomics

Positive economics:-Positive is concernedwith what is. Thus positive economic may be

defined as a body of systematic knowledgeconcerning what is.

Thus when it confines itself tostatements about cause and there effect and

to statement of functional relationship, the

theory is said to be positive economics.

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Normative economics:-

Normative economic is concerned

with what ought to be. Normative economics is a

systematic body of knowledge relating to what oughtto be and it is concerned with the ideal distinguished

from the actual.

Thus the objective of normative

economic is the determination of ideals.

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Demand

Demands refers to the quality of a good or service thatconsumers are willing and able to purchase. Effective

demand depend upon 3 things.

(i) Desire(ii) Means to purchase

(iii) On willingness to use those means for thatpurchase.

Unless demand is backed by purchasing

power or ability to pay, it is not called as demand.

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Determinants of demand

Price of the commodity.

Price of other related commodities.

Level of income. Tastes and preferences of consumers.

Size and composition of population.

Distribution of income. Size of population.

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Law of Demand.

Price falls the quantity demanded of it will rise.

Price rises the quantity demanded will decline.

This is assumed when other things remained

constants which include prices of relatedcommodities, income of consumers, tastes and

preference of consumers and such other factor

which influence demand.

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Exception to Law of Demand

Some commodities are more desirable at ahigher price. Then more of it will be demandedat higher price and less of it at lower price. Fore.g. GOLD

If people fear that the rise in future will be morethan the prevailing price, they will buy more

even at higher price. Similarly if people feelprices would fall in future, they would buy lesseven if there was a fall in price.

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Supply

Supply refers to the amount of a good or services

that the producer are willing and able to offer to the

Market.

There are 2 important points apply to supply

(i) The supply refers to what firm offer for sale, not

necessarily to what they succeed in selling.

(ii) Supply is a flow. The quantity supplied is on the baseof per unit of time, per day, per week or per year.

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Determinants of Supply

Number of firms or sellers

Level of technology.

Price of the factor of production. State of technology.

Government policy.

Foreign policy. Infrastructural facilities.

Market structure

Natural factors.

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Law of Supply.

The quality of a good produced andoffered for sale will increase as the price ofthe goods rises.

As the price decrease the quality of thegood produced and offered for sale willalso decline.

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Types of Market

Farmers Market.

Financial Market.

Grocery Market. Stock Market.

Media Market.

Street Market. (Atvada) Market Place.

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Types of Market Structure.

Market structure:- There are four main type

of market structure.

(i) Perfect competition.

(ii) Monopoly.

(iii) Monopolistic competition.(iv) Oligopoly.

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Perfect competition:-

Perfect competition is said when there are

many seller selling identical product tomany buyers.

Monopolistic competition:-Monopolistic competition is

said when there are many sellers sellingdifferentiated products to many buyers.

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Monopoly:-

Monopoly is said when there is onlyone single seller for many buyers. This type ofmarket structure does not have any competitionor any substitute goods.

Oligopoly:-

Oligopoly is said when there are few

sellers selling competing products for manybuyers.

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What is Economic Growth?

Economic growth is the increase in value of

goods and services produced by the economy.

Thus economic growth means increase in

aggregate output of real goods and services during

a given period of time, generally a year.

E.G=(Aggregate product at current price/ Price index of the current year) X 100

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Major factor affecting economicgrowth.

Poverty.

Illiteracy. Population growth.

Unemployment.

Government policy. Foreign policy.

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Major sector of Indian Economy

Agricultural sector.

Manufacturing sector.

Financial sector. Service sector.

Indian Industrial sector.

Infrastructure

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Some important concepts of economy:-

What is inflation.

What is deflation

Balance of trade

Balance of payment Gross domestic product

Gross national Product

Net national product

Purchasing power parity.

Human Development Index

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Inflation

Inflation refers to the general rise in

price measured against a standard level of

purchasing power.

Inflation is measured by comparing

two sets of goods at two point in time and

computing the increase in cost not reflectedby an increase in quantity.

For E.g.- BLACK MARKETING

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Deflation

Deflation is the opposite of inflation.

Deflation is the decrease in the general price level.

Deflation refer to the decrease in size of the moneysupply.

During deflation the demand for liquidity

assets goes up in preference to goods and

fixed assets.

E.g.- Duplication of goods or products.

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Balance of trade

Balance of trade means the difference

between the value of goods that a nation exports

and the value of goods that it import annually.

When a country exports more than its

import, its balance is favorable, and when import is

more than its export then balance of trade is

unfavorable.

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Balance of Payment

Balance of payment systematically

record all the economic transaction between

one country and the rest of the world in a

given period of time.

It include the amount for shipping,banking, insurance, technical service and

tourisms etc.

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Gross Domestic Product (G.D.P)

GDP is one of the way of measuring the size of the economy.

GDP of a country is defined as the market value of all final

goods and services produced within a country in a given periodof time.

GDP= (Nominal GDP/Real GDP) X 100

Nominal GDP = Consumption + investment + governmentspending + (export import)

Real GDP = Production of current year & base yearprice.

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Gross National product (G.N.P)

Gross national product is defined as the sum

of the gross domestic product and net income from

abroad.Thus to estimate the GNP of INDIA we have of

add net income earned from abroad by Indian

residents minus income earned by non residents in

India.

GNP = GDP + NIFA

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Net national product

Net national product is the total

market value of all the final goods and

services produce by a citizen of the economy

during a given period of time minus

depreciation.

NPP= GNP Depreciation.

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Purchasing Power Parity (PPP)

Purchasing power parity theory was

developed by Gustav Cassel in 1920. it is the

method of using the long run equilibrium exchangerate of two currencies to equalize the currencies

purchasing power

PPPs main motto is to see that inefficient market identical goods must have only

one price.

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Human Development Index (HDI)

HDI is a comparative measure of life expectancy, literacy, education andstandard of living.

Thus HDI measure the average achievement of the countries on threebasis.

(i) A long and healthy life, as measured by life expectancy at birth rate.

(ii) Knowledge as measured by the adult literacy rate (with 2/3rd

weight)and the combined primary, secondary and tertiary gross enrollmentratio (with 1/3rd weight)

(iii) A decent standard of living as measured by GDP and PPP inU.S.Dollar.

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Now we shall be discussing aboutthe following topic:-

1.Indian Economy.

2.World Economy.

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Types of country from the viewpoint of Economy Strength.

All the countries of the world aredivided in mainly three parts

(1) Developed Countries

(2) Developing Countries(3) Underdeveloped Countries.

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Developed Countries

Developed countries are

those countries which are economically,

financially and industrialized developed

countries.

According to United Nation

developed countries are those whose HDI is

0.9 or more (as of 2004)

For E.g.- U.S, Australia, Japan, U.S.S.R etc

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Developing Countries

Developing countries are

those which has relatively low standard of

living, not financially sound and not well

developed industrial sector.

Thus developing countries are those

countries which are on the way of development

and not achieved the HDI of 0.9.E.g.- South Africa, India, Pakistan, Sri-Lanka etc

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Underdeveloped Countries

Underdeveloped countries are those countries which according to the

United Nations exhibit low indicators of socioeconomic development,

with the low HDI rating of all the countries.

Under developed countries are called under developed if they meet thebelow criteria:-

(i) Low income (3 years GNI per capita less than $750)

(ii) Human resource weak (based on nutrition, health, education andadult literacy)

(iii) Economic instability in production agricultural goods andindustrial goods, services, employment opportunities etc.

E.g.- Bhutan, Nepal, Afghanistan, Bangladesh etc.

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Indian Economy

India is considered as a developing country.

The economy of India is the 5th largest in theworld on the basis of PPP.

India is the 10th largest country in the world incase of GDP.

India is the 2nd fastest growing major economy inthe world with a GDP growth rate of 9.2% at theend of the second quarter of 2006-2007.

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Position of India on the basis ofPurchasing Power Parity

in the World.

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Rank of the countries on the basis of GDP

Sr.no Country Million in US Dollars.

1 United States 11,667,5152

Japan

4,623,398

3 Germany 2,714,4184 UK 2,140,8985 France 2,002,5826 China 1,932,0937 Italy 1,672,3028 Spain 991,4429 Canada 979,76410 India 691,876

Position of India on the basis ofGross Domestic Product

in the World

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Indias development on the basis of

different sectors:-

(1) Agriculture:-

India ranked 2nd in the world in farm output.

Agricultural and allied sector like fishing, forestry

etc accounted for 18.6% of the GDP in 2005 andemployed 60% of the total work force.

Yield in per unit area of all crops have grownsince 1950 and if internationally compared theaverage yield in India is generally 30% to 50% ofthe highest average yield in the world.

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(2) Industry:-

India is fourteenth in the world in factory output.

They together account 27.6% of GDP andemployed 17% of the total work force.

Here are Indias 5 leading company in the list of

Fortune Global 500 for the year 2006.

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(3) Service:-

India is ranked fifteenth in the serviceoutput.

It provided employment to 23% of workforce.

It has the fastest growth rate of 7.5% in1991-2000 which before was 4.5% in1951-1980.

It has the largest share in GDP accounting53.8% in 2005 from 15% in 1950.

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(4) Banking and Finance:

Prime Minister Indra Gandhi Nationalized

15 banks in 1969 followed by other 6 in1980.

Since then the number of bank branches

increased from 10120 in 1969 to 98910 in2003 and the population covered by abranch decreased from 63800 to 15000

Total deposits increased by 32.6 timesbetween 1971 to 1991

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World Economy

World economy can beevaluated in various ways, depending onthe model used and this valuation can be

represented in various ways.

E.g. in 2006 US Dollars.

Now we shall learn about

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Now we shall learn aboutUnited State

U.S is considered as developed countries.

U.S GDP is more than $13 trillion, whichconstitute 22% of the gross world product.

It has abundance amount of naturalresource, well developed infrastructureand high productivity.

In U.S more than 80% of the populationhave full time employment of which 79%are employed in service sector.

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Economy of Japan

Japan is 3rd largest country by volume onbasis of PPP.

The GDP growth rate was $4.22 trillion in

2006 It employed 1.6% in agriculture, industry

25.3%, service 73.1% in 2006.

Its export estimated $ 590.3 billion, andimport $ 524.1billion

So it is known as a developed countries.

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The End

Contact:- Abhilash AlphonsoAsha ManzilKarwad P.O