Fundamental of Economic and its types

Fundamental of Economic and its typesDefinitionsADAM SMITH: Study of how wealth is produced and consumed. This definition is also called wealth Definition. This definition is too materialistic as it gives more importance to wealth than to man for whose use wealth is produced. Prof. Alfred Marshall: Economics is the study of mankind in ordinary business of life. Its study of wealth as well as man. Wealth means any commodity which gives man satisfaction or utility or welfare. Wealth is the means to welfare. His definition is also called welfare definition. DefinitionsLionel Robbin: Economics is the science that studies human behaviour as a relationship between ends and scare means which have alternative uses. The means or resources are less in relation to their demand. How men use the scare resources to fulfil their desires is the subject matter of economics. This is also called Scarcity Definition.Analysis of Robbins DefinitionMan has unlimited wantsThe means to satisfy are limitedResources also have alternative uses.Man has to make a choice.MicroeconomicsAdam Smith: Founder of microeconomicsIt studies how households and firms make decisions to allocate limited resources, typically in market where goods and services are being bought and sold.These decisions affect demand and supply which in turn determines prices which again determines demand and price.MacroeconomicsIt is concerned with overall performance of the economy.Deals with performance, structure and behaviour of a national or a regional economy as a whole. It is the study of the behaviour and decision of the entire economics. It studies aggregated indicators like GDP, unemployment and price indices to understand how the whole economy functions. Macroeconomists develop models that explain the relationships among such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance. Types of EconomiesMarket/ Capitalistic EconomyCommand/ Socialistic EconomyMixed Economy

Market EconomyHere individuals and private firms make major decisions about production and consumption. Firms produce commodities that yield highest profit by the techniques that are least costly. Consumption is determined by the individuals decisions about how to spend their incomes. Laissez-faire: Extereme case of market economy in which government doesnt interfere in economic decisions.Developed nations have Market/ Capitalistic Economy.Command EconomyHere government makes all the decisions about production and distribution. Soviet Union during most of the twentieth century has this type of economy. The government addresses major economic questions by virtue of its ownership of resources and its power to enforce decisions.Mixed EconomyIt has elements of both market and command economies. Today most of the nations have mixed economies.