The Fundamentals of Micro and Macro economics: The Indian Institute of Banking and Finance, as we all know, conducts CAIIB examinations (IIBF). CAIIB is one of the most challenging courses for bankers to pass. The CAIIB examinations are held twice a year. Before taking the CAIIB Exam, candidates must have completed the JAIIB. So, from “Paper 1: Advanced Bank Management (ABM),” we have provided “Unit 1: Fundamentals of Economics, Microeconomics and Macroeconomics, and Types of Economies” from “Module A: Economic Analysis.”
\The Fundamentals of Economics
The Fundamentals of Micro and Macro economics: Economics is a branch of sociology. It is currently one of the most significant disciplines of knowledge. We strive to comprehend how the economy of a certain area, country, or global economy works in this subject of study. The word “economics” comes from the Greek word “oikonomia,” which means “household.” The ancient Greeks used this concept to govern a city-state they termed ‘Polis.’ As a result, a political economy was born. Economists have presented numerous definitions of Economics now and then as per their knowledge of diverse conditions requiring economic solutions. It evolved as a full-fledged social science in the latter part of the 18th century with the release of Adam Smith’s masterwork. A few of the definitions supplied by a well-known economist are described here to help you grasp the subject.
Wealth Definition
Adam Smith, David Ricardo, J.B. Say, and J.S.Mill all support this concept of economics. They consider economics to be a wealth science.
- “The Science which treats nature, production and distribution of wealth is economics” — Daven Port.
- “Economic is a subject concerned with an enquiry into the nature and causes of the wealth of nations”- Adam Smith
- “Economics is a science of wealth in relation to man” — J.S. Mill.
- “Economic is a science which treats of wealth” – J.B. Say.
- “Economics is the name of that part of knowledge which relates to wealth” — Walker.
Welfare Definition
Alfred Marshall was the very first economist to change the focus of economics away from money to welfare. Prof. Cannon, Prof. A.C. Pigou, and Prof. Penson are among the economists who have embraced this school of thinking.
- “Economics is a science of material welfare” — Prof. Penson.
- “Aim of political economy is the explanation of general causes on which the material welfare of the human beings depends” — Prof. Cannon.
- “Economics is the study of Economics welfare, economic welfare being that part of social welfare which can be brought directly or indirectly into relation with the measuring rod of money” — Prof. A.C. Pigou.
- “Political economy or economics is a study of mankind in the ordinary business of life, it examines that part of individual and social actions which most closely connected with the attainment and with the use of material requisites of well being” — Alfred Marshall.
Marshall’s definition has the following key features: Economics is only concerned with everyday living. The ordinary business of life refers to what a regular human being performs for a living. In other words, it encompasses human income-generating and income-spending activities.
Economics is a branch of social science. It investigates the economic difficulties of those who live in a structured society. Men like Robinson Crusoe who live apart from civilization are not covered by economics. Economics is only concerned with the tangible necessities of life. Humans may also engage in political, social, and religious activities. However, these activities cannot be assessed using a monetary scale. As a result, Marshall narrowed the scope of economics to studying only those economic activities that can be measured in money.
Scarcity Definition
Prof. Robin came up with this economic definition. As per Robin, “Economics is a science which studies human behaviour as a relationship between ends and scarce means, which have alternative uses”.
The essential fundamental conditions are brought back by Robbins’ Definition:
- Economics is a positive science. It is a discipline that explores how humans accommodate their numerous desires for scarce resources. As a result, economics has nothing to do with welfare 6- 6.
- Human behaviour is studied in economics. It is the decision-making behaviour that is not directly tied to welfare, but rather to aims and limited resources.
Ends: Ends relate to limitless human desires. Man has many desires. As one want is fulfilled, another develops. As a result, all desires can never be fully gratified.
Scarce Means: Human desires are limitless, but the resources (financial resources, time, etc.) to fulfil them are finite. When the supply of resources falls short of the demand, man is faced with an economic crisis. The majority of products that satisfy human desires are in short supply. Certain desires go unfulfilled when resources are scarce.
Alternative uses of scarce means: If the few resources were only used once, there would have been no difficulty with allocation. However, the true problem emerges because the methods have several applications, each of which is not equally intense. Between the many purposes, a decision must be taken. When we choose one option, we must forego the other.
Efficiency Definition
The optimal production and utilization of commodities and resources to reduce waste are referred to as economic efficiency. Economic efficiency has an impact on both businesses and consumers, so understanding it may help you make better decisions. When an economy has a fair, accessible, and effective allocation of products and services throughout society, it is said to be efficient. Businesses may eliminate waste and make better use of their resources when economic conditions are favorable. Economic efficiency is influenced by the availability of goods and services, the manufacturing process, and customer behavior.
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