What is Economics all about:
Economics is the study and evaluation of economic problems. Each and every economic problem is a problem of choice and valuation.
In business several decisions are to be taken. For example, a production unit has to decide- what to produce? When to produce? for Whom to produce? Why to produce?
In the same way, a finance enterprise dealing with funds confronts the issues – when to raise finds? Where from? Where to direct the use of these funds? At what Risk and Returns combinations funds are to be raised? What should be maturity and other terms and conditions with regard to loans disbursed or deposits mobilized?
In the same way a company has to decide – how many people are to be recruited? For what post and position? Through direct recruitment or internal promotion. To retire a person or replace? To train – develop existing employees towards promotion and transfer
or to hire trained personnel?
In the same way, a marketing firm has to resolve whether to sell or market? At what price? Whether to provide after sales service or not? What should be the target group/territory? Should there be any price discount or not? Should deferred payments be allowed or not? Should the focus be on domestic or export market? Should the sales promotion be aggressive or defensive? Should special efforts be made towards sales promotion or not?
In all of the above examples, the decision problems represent an area of Choice?
The question of choice arises as and when means (resources) are adjusted to ends (wants). The purpose of economic activity is to satisfy maximum possible ends by sacrificing minimum possible resources.
Human wants have fundamental characteristics:
1. Wants are unlimited
2. Wants can be graded in order of their intensity.
Resources’ fundamental characteristics are: