Chapter - 1.

Nature and scope of economics.

Economy -

An economy is a system which helps to produce goods and services and enables people to earn their living.

Economic as a positive or normative science :

• ''Economics is a science and economics is positive science mean the same thing''
• ''Economics as an art and normative economics means two related but different things"

• It shows Cause and effect relationshisp,
• It investigates "what is", "what was", "what will" ? 
• It dose not pass value judgements.
• It is not concerned with welfare propositions.
• This approach of economics.was propunded by lione robbins.

• Normative is derived from the word "norm" or ''standerd'' which implies  ''what ought to be".
• It passes value judgements.
• It is concerned with welfare propositions.
• It decides standars which should be adhered to in achieving economic objectives.
• This approach was propounded by alferd marshall.

herce, economics is both a positive and normative Sciennce

Scope of Economics:

• It studies the economics issues of an individual unit like an individual consumer, producer or a firm. 
• In other words, it studies the berhaviour of individual economic units.
• In this we use " bit by bit " approdach which means breaking a big problem into small parts and then study one bit at a time.
• It deals with the problem of alloction of resources.
• it is also known as the "price theory".
• some of the components of micro economics are:

1. theory of consumer behavior.

2. theory of production.

3. theory of product pricing.

• It studies the economic issues at a level of an economy as a whole.
• Under this variables are aggregat and relate to large groups of economic units.
• In other words, it studies economic units.
• Macro economics is also known as "income theory" or "aggregative economics"
• Some components of macro economics are:

1. National income.

2. Labour force and population.

3. Unemployment.

4. Balance of payment.

Economic Problem -

It is a problem of selection of scarce resources for satisfying unlimited human wants.

Causes of Economic Problem -

• Resources are limited,
• Human wants are unlimited, and
• alternative uses of resources.