School of Economics

Relationship between TU & MU 1-Till MU positive TU increases at diminishing rate. 2-When MU is zero TU is at its maximum. 3-When MU is negative TU starts falling. 4-TU is the sum of MU. 5-MU is the rate of TU. fig-1 For more detail: please watch this video ,subscribe #vc official on youtube.

 Concept of utility: it refers to satisfaction derived from the consumption of a goods. In other words want satisfying power of a commodity is called utility Cardinal measurement of utility:  The great economist Alfred  Marshall said we can measure the satisfaction in terms of cardinal numbers like 1,2,3 etc. And standard unit of measuring the satisfaction is called utils. Total Utility: It is the total number of utils derived from the consumption all units of a goods.Ex- If I consume one chocolate and get 10 utils, and again I consume the same chocolate and get 9 utils then total utils =19 utils.                                                                  TU=∑MU                        Marginal Ut...

Opportunity cost and marginal opportunity cost Opportunity cost:  It is the cost of availing one opportunity in terms of loss of other opportunity. In other words, it is the cost of shifting resources from one use to the another. It is equal to loss of output in use-1 when resources are shifted from use-1 to use-2. It is also called total opportunity lost. Marginal opportunity cost:  It refers to loss of output of one goods to gain an additional unit of other goods. let's say, if we shift resources from production of goods-y to production of goods-x then we loss 10 units of goods-Y and we gain 2 units of goods-X, then marginal opportunity cost= loss/gain therefore 10/2=5, In easy word, to produce one unit of goods-X we have to sacrifice 5 unit of goods-Y.It is also called marginal rate of transformation. Table-2 Units of Goods-X Units of Goods-Y Opportunity cost Marginal opportunity cost 0 100 - - 10 ...

 Rotation of Production possibility curve: PPC can rotate in following circumstances. 1-Improvement in the technology in the favour of good -X : If there is an improvement in the technology in favour of goods -X then the production of goods-X raise on that the particular resources but production of goods-Y remains the unchanged accordingly PPC rotates. Fig-6 Before the improvement in technology in the favour of goods-X the PPC is ab but after improvement it rotates and be ac. 2-Improvement in the technology in the favour of good -X :  If there is an improvement in the technology in favour of goods -Y then the production of goods-Y raise on that the particular resource but production of goods-X remains the unchanged accordingly PPC rotates. Fig-7 Before the improvement in technology in the favour of goods-Y the PPC is  ab  but after improvement it rotates and be  ac. Note: If any technical improvement done in favour of both goods then PPC will shift, not rotate....

 Attainable and unattainable combinations of PPC : Those combination which are lie either on PPC or the inside of PPC are called attainable combinations, but those combinations which are lie outside the PPC are called unattainable combination of PPC.  Figure-2 In the figure-2, A,B,C& Z are attainable combinations of PPC, where combinations A,B,C offer fuller utilisation of resources but combination Z offers underutilisation of resources, while on the other hand combination K is unattainable combination. For more detail: please watch this video ,subscribe #vc official on youtube.

Production possibility  curve Assumptions: 1-Resources are given and cannot change. 2-Given resources are fully and efficiently utilised. 3-Technology is constant. Production possibility schedule: It is the tabular representation of different possible combination of two goods which can be produced assuming above assumptions.   COMBINATIONS A B C D E RICE(in Kg) 100 90 70 40 0 WHEAT(in Kg) 0 10 20 30 40    Production possibility curve: It is a curve showing different possible combination of two goods which can be produced with given resources assuming above combinations. figure -1      Properties of slope of PPC: 1- Slope of PPC = loss of qn. of goodY                                      gain  of qn. of good X    2-PPC is concave. 3-PPC is downward left to right because to produce one unit of good-X we have to sac...

Central problem of an economy:  It is the problem which has to be faced to every economy whether the country is vibrant or stagnant, rich or poor, developed or backward because resources are limited and demand for resources is unlimited,resources have their alternative uses due to which problem of choice arises. It has three dimensions: 1-What to produce? 2-How to produce? 3-For whom to produce? 1-What to produce: This is the problem of choice of goods. It has also two dimensions.     a-What goods to be produced?     b-In what quantity goods to be produced? In every economy there are two types of goods, consumer goods (consumption goods like Icecream etc) and capital goods (producer goods like machines etc). If we put all resources to produce capital goods then our future will be good but currently we will suffer lack of consumer goods,and if we put all resources to produce consumer good then our present generation enjoy but our future generation will trouble. 2...

Economy: A geographical area known as an Economy where some people earn their living by performing different economic activities. Like A teacher teaches, Doctor treats patients,to satisfy own needs.         When people are less dependent to each other for their needs, is known as Simple Economy . But when the degree of dependence is high then it is called Complex Economy. At present we are living in complex economy, because our needs are very vast. Types of Economy 1-Centrally Planned Economy 2-Free or market Economy 3-Mixed Economy 1-Centrally planned Economy- These are those economy where maximum economic decisions are taken by some central authority or central government to keeping view in mind to maximize social welfare.Consumers are not sovereign in this economy. Public sector dominates the economy. Like Russia ,China(Before) Etc. (Economic decisions are mainly What to produce ,how to produce and for whom to produce) 2-Market or Free Economy:  These ar...

  Positive and Normative Economics Positive Economics: It deals with Economic statement related to past, present or future . It deals with such economic situation which can be studied by using facts and figures thus it is verifiable in nature. Ex: Population of India is more than 120 crores. Normative Economics: It is the Economics of " What is ought to be". It deals with the opinions of Economists related to the Economic issues or problems. Different Economists may offer different opinions on the solution to an economic problem, thus it cannot be verified. Ex: Wage of a worker must be ₹1000/ per day. For more detail: please view this video ,subscribe #vc official on youtube.

  Economics : It is that branch of knowledge in which those activities of human beings are studied which they undertake to acquire scarce means to satisfy their unlimited wants. It is the rational management of scarce resources at optimum level. Resource is anything which is useful to satisfy the human wants,but it is technologically accessible,economically feasible and culturally acceptable. In Economics resources are means to production(Land,Labour , Capital, Entrepreneur). Characteristics of resources in Economics: 1- It is scarce in nature. Like land etc 2- It has alternative uses. Like we can use land for farming or living. 3-Human wants are unlimited for resources. Like we want enough land on which we can produce everything as well as we live comfortably. The above three factors leads to choice,thus scarcity and choice is the essence of Economics. Branches of Economics 1-Micro Economics 2-Macro Economics 1-Micro Economics: It is that branch of economics which deals with econ...