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Unit 1: Basic Concepts of Economics
Dilfraz Singh, Lovely Professional University

Unit 1: Basic Concepts of Economics Notes

CONTENTS

Objectives
Introduction

1.1 Definition of Economics
1.2 Scope of Economics
1.3 Types of Economics and its use in Managerial Decisions

1.3.1 Economics and Managerial Decision-making
1.3.2 Central Problems of an Economy
1.4 Summary
1.5 Keywords

1.6 Self Assessment
1.7 Review Questions
1.8 Further Readings

Objectives

After studying this unit, you will be able to:

Defi ne economics
Discuss the scope of economics
Describe the types of economics and use in managerial decision
State the three central problems of an economy

Introduction

We all use economics in our day-to-day life. For example, all of us have to make certain choices
with the limited money at our disposal. You may spend your money on things like food, house
rent, electricity bills and medicines, and somebody else may spend the same amount of money
on buying clothes, watching movies and other allied activities. Both spend the same amount of
money, but in a different manner. Making such choices is just one activity related to Economics.
Then what is Economics? Different people may define economics in varied manners, but in all

likeliness they all would only be partly right. In this unit, you will get introduced to Economics as

a field of study and its fundamentals. The fundamental nature of economics is trying to understand
how both individuals and nations behave in response to certain material constraints.

1.1 Definition of Economics

Now let’s go through the various defi nitions of economics as given by various economists and
other sources.
Simply defined, “Economics is the social science that examines how people make a choice for

using their limited or scarce resources in order to satisfy their unlimited wants.”

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