Fundamentals of Economics, Microeconomics

and Macroeconomics and Type of Economies

Module A: Economic Analysis

M S Ahluwalia

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Advanced Bank Management: Fundamentals of Economics,

Microeconomics and Macroeconomics and Type of Economies

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Contents
Coverage:
1. Economics

An

Introduction
2. Microeconomics

and

Macroeconomics

3. Problem of an Economic
Organisation
4. Types of Economies
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1.

ECONOMICS- AN INTRODUCTION

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Economics
Science of
Human
Welfare
A Study of
Wealth

A Study of
Means
and Ends

Economics

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A Study of Wealth
Adam Smiths Definition: The subject matter of economics is
the study of how wealth is produced and consumed.
Also known as the wealth definition

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Science of Human Welfare

Prof. Alfred Marshalls Definition: Economics is a study of
mankind in the ordinary business of life. It is on one side, the
study of wealth and more important side, a part of the study
of man.
The ultimate purpose of Economics is to promote well-being
or welfare.
Also known as the welfare definition

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A Study of Means and Ends

Lionel Robbins Definition: Economics is the science which studies
human behaviour as a relationship

between ends and scarce

means which has alternative uses.

Also known as the scarcity definition

Important aspects:
Man has unlimited wants
The means to satisfy human wants are limited
Resources are not only limited but have alternative uses
Man has to make a choice. Economics is the science of choice.
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2.

MICROECONOMICS AND MACROECONOMICS

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Microeconomics and Macroeconomics

Microeconomics is a branch of economics that studies how
households and firms make decisions to allocate limited
resources, typically in markets where goods or services are
being bought and sold. Focused on individual agents.
Macroeconomics deals with the performance, structure and
behaviour of a national or regional economy as a whole.

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3.

PROBLEM OF AN ECONOMIC
ORGANISATION
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3 Problems of an Economic Organisation

What is to be produced?
How are the goods to be produced?

For whom are they produced?

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4.

TYPES OF ECONOMIES

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Types of Economies
Market Economy/
Capitalistic Economy

Command Economy/
Socialistic Economy

Individuals and Private

Firms make the major
decisions about
production and
consumption.
Firms produce the
commodities that yield
the highest profits (What)
by the techniques of
production that are least
costly (How) for those
who have the means and
are willing to spend
(Whom)
Laissez Faire Economy
Extreme case of a market
economy

Govt. makes all the

important decisions
The govt. addresses the
major questions by virtue
of its ownership of
resources and power to
enforce decisions.
Ex: Former Soviet Union

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Mixed Economy
Has elements of both
Market and Command
Economy.
All modern day
economies fall under this
category.
Ex: India

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Do you have any questions or queries or some feedback to give?

Just mark an email to super.msahluwalia@yahoo.com

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M S Ahluwalia, amongst other things, is a visual artist, blogger,

blog designer and of course an MBA and Banker from New
Delhi, India.
To know more about him you may visit his blog-site: Estudiante De La Vida

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