The branch of science and technology concerned with
the design, building, and use of engines, machines,
and structures.
Engineering is the discipline, art, skill and
profession of acquiring and applying scientific,
mathematical, economic, social, and practical
knowledge, in order to design and build structures,
machines, devices, systems, materials and processes
that safely realize improvements to the lives of
people.
Technology
 The application of scientific knowledge for practical
purposes, especially for industries and society:
"computer technology"; "recycling technologies".
 Technology is the branch of knowledge that deals with
the creation and use of technical means and their
interrelation with life, society, and the environment.
Economics
 The branch of knowledge concerned with the production,
consumption, and transfer of wealth.
 Economics is the social science that analyzes the
production, distribution, and consumption of goods and
services. The word "economics" has its origin in the Greek
"oikonomikós" (relating to household management), from
"oikos" (house) +(nomos, "custom" or "law"), hence "rules
of the house(hold)".Current economic models emerged
from the broader field of political economy in the late 19th
century.
 Economics aims to explain how economies work and how
economic agents interact. Economic analysis is applied
throughout society, in business, finance and government,
education social institutions, war, and science.
Definitions of Economics
 Wealth definitions
 Welfare definitions-economics is a study of mankind in
the ordinary business of life; it examines that part of
individual and social action which is most closely
connected with the attainment and with the use of the
material requisites of wellbeing.” Alfred Marshall
 Scarcity definition
 Growth – Oriented definition
Wealth Definition
Welfare Definition
Scarcity Definition
Growth Definition
Nature & Scope of Economics
 Science refers to a systemized body of knowledge which




collects facts and tries to make an association between
these facts which are useful for daily life and works on some
laws and principles and these rules and principles are
universally applicable. The following are the essentials of
science –
A systematic study of facts
Certain rules and principles
Rules and principles of science are based on cause and
effects
Rules and principles of science are universally applicable.
Art refers to that branch of knowledge which teaches how to
do a particular act in a systematic manner or in its best.
Economics is a Science
 Systematic study of facts
 Use of economic laws and principles
 It establishes relationship between cause and effects
 Universality of laws and principles
Economics as an Art
 Helpful in the solution of economic problem
 Increasing importance of applied economics
 Economic aspect of problems
 Economics as an art does not weaken its scientific aspect
Thus an economist works as a scientist when he studies
economics and an artist when he practices it. According to
Cossa- “ Science requires art, art requires science, each
being complementary to other.”
Thus economics is a science in its methodology and an art in
its application.
Positive Science
Normative Science
Positive VS Normative
Positive & Normative
 Positive Economics: Derives useful theories with testable propositions
about WHAT IS?
 Normative Economics: Provides the basis for value judgments on
economic outcomes. WHAT SHOULD BE?
Economics
 Economics can be defined as “Economics is the social science which studies human
activities and how society maximizes the satisfaction
with the promotion of welfare and economic growth by
efficient use of limited or scarce resources which have
alternative uses.”
Scope of economics
 Micro Economics
 Macro Economics
Micro economics can be defined as that branch of
economic analysis which studies the economic
behavior of the individual unit i.e. a firm , a producer,
an industry, a consumer etc.
The important areas of study under micro economics
are Theory of consumer behavior and Demand Analysis
 Theory of production and cost
 Theory of distribution or factor pricing
 Theory of economic welfare
MACRO ECONOMICS- Macro economics the behavior
of all the units combined together i.e. total
production, total investment, level of employment,
national income. The fields covered under macro
economics Theory of Income, Output and Employment
 Theory of business cycle
 Theory of general price level
 Theory of economic growth
 Theory of money
Managerial economics
 Managerial economics constitutes those theories, tools
and techniques useful in business decisions having
economic or financial implications.
What is Managerial Economics?
Douglas - “Managerial economics is .. the
application of economic principles and
methodologies to the decision-making
process within the firm or organization.”
Pappas & Hirschey - “Managerial economics
applies economic theory and methods to
business and administrative decisionmaking.”
Salvatore - “Managerial economics refers to
the application of economic theory and the
tools of analysis of decision science to
examine how an organisation can achieve its
22
Nature
of
Managerial
Economics
 Managerial economics is Science as well as Art
 It is a micro economics in character
 It is a normative science.
 Prescriptive rather than descriptive
 Pragmatic approach
 Use of macro economics principles
 Integration of economics and business management
Applications of Managerial
 Demand forecasting
Economics
 Cost and revenue decision
 Pricing decision
 Capital and investment decision
 Study of economic environment
 Estimating economic relationship
 Basis of business policy
Scope
 Product policy, sales promotion and market strategy
 Demand analysis and forecasting
 Cost analysis
 Production analysis
 Market and market structure
 Pricing decisions
 Profit management
 Capital and investment management
Responsibilities and specific
functions of a Manager
 Better management of resources
 Forecasting- demand and sales
 Market research
 Investment analysis
 Production and inventory control
 Study of environment
 Creating competency to work with global world.
Role of science and technology in
economic development











Reduction in the human efforts
Utilization of natural resources
Increased efficiency
Solving the problem of scarcity
Factor substitution
Mechanization of production process
Exploration and discovery
Infrastructural development
Improvement of agriculture
Dealing with rural problems
Science and technology for national self relience
Demand Analysis
 In common usage, demand means a desire or a want but in
economics:
 Desire, want and demand are three different concept.
1. Demand is an effective desire: a desire becomes an effective
desire only when it is supported by following three factors;-Desire for a commodity and the availability of desired
commodity
- Ability to pay
- Willingness to pay
A desire can not be a demand unless it is supported by all
the factors.
 2.-Demand is the quantity of a commodity demanded at a
particular price- Prof. Mill suggests- “ Demand of a
commodity is the quantity of it that a consumer is ready to
purchase at a given price.”
 3.- Demand is the quantity of a commodity demanded at a
particular time. Prof. Bentham has related the demand of
commodity with a particular time and also a particular
price. In his words- “ the demand of a commodity at a given
price is the quantity of it which bought at a particular time
at that price”.
 Thus, demand can be defined as an effective desire of a
commodity which is expressed with reference to a
particular time and a particular price.
 Demand is an effective desire that buyers
are willing to purchase at alternative
prices for a given period.
Essential Elements of demand
 There must be some desire for a particular commodity
 Desired commodity must be available in market
 The consumer must have sufficient money to purchase
the commodity
 The consumer must be ready to spare the money for
the purchase of commodity
 The demand must be expressed at particular time and
at particular price.
Types of demand
 Price Demand
 Income Demand
 Cross Demand
 Demand for Consumer Goods
 Demand for Producer Goods
 Short run and long-run Demand
 Joint Demand
 Derived Demand
 Collective Demand
Price demand
 Price demand shows the inverse relationship between
demand and price. Being other things constant if price
rises, demand decreases and vice versa.
Income
– As income increases, the demand
for a normal good or superior
good will increase.
– As income increases, the demand
for an inferior good will
decrease.
Cross
Demand
– Cross demand
studies effect on the
demand of a particular commodity due to
changes in the price of other related
goods.
– Prices of Related Goods


When a fall in the price of one good
reduces the demand for another good, the
two goods are called substitutes.
When a fall in the price of one good
increases the demand for another good,
the two goods are called complements.
Determinants
of Demand
Product’s Own Price
Consumer Income
Prices of Related Goods
Tastes
Quality
Expectations
Cost of Repair and maintenance
Number of Consumers
Factors affecting the demand of
capital goods
 Demand of goods and services to be produced
 Size of population
 Probability of technical advancement
 Propensity to consume
 Government policy
Law of Demand



Law of demand explains the relationship
between price and demand of a commodity.
It states that, other things equal (ceteris
paribus), the quantity demanded of a good
falls when the price of the good rises.
Thus law of demand explains inverse
relationship between price and quantity
demanded.
 Relationship between Price and
Demand is Inverse but not
necessarily Proportionate-
it is very
important to note regarding law of demand that it is
only a qualitative statement and not a quantitative
statement. This law explains that demand of a
commodity increases when price decreases and
decreases at higher prices but it doesn’t tell us how
much quantity increase on a certain fall in the price of
a commodity and vice- versa. Thus law of demand
indicates only the direction of change in the demand
but it does not establish any arithmetical relationship
between price and demand
The Demand Schedule and
the Demand
Curve
– The demand
schedule is a table
that shows
the relationship between the price of the
good and the quantity demanded.
– The demand curve is a graph of the
relationship between the price of a good
and the quantity demanded.
– While “Other thing being equal”
Price
of IceDemand
Schedule
cream Cone ($)
Quantity of
cones Demanded
0.20
12
0.50
10
1.00
8
1.50
6
2.00
4
2.50
2
3.00
0
Price of IceCream Cone
Demand Curve
$3.00
2.50
2.00
1.50
1.00
0.50
0
2
4
6
8
10
12
Quantity of
Ice-Cream
Cones
Market
Demand
Schedule
demands at each possible price.
• Market demand is the sum of all individual
 Graphically, individual demand curves are
summed horizontally to obtain the market
demand curve.
• Assume the ice cream market has two
buyers as follows…
Market demand as the Sum of
Price of IceIndividual
Demands
Nicholas
Catherine
cream Cone ($)
0.00
12
0.50
10
6
16
1.00
8
5
13
1.50
6
4
10
2.00
4
3
7
2.50
2
2
4
3.00
0
1
1
+
7
Market
=
19
Assumptions
 Income of consumer is constant
 No change in habits or tastes
 No change in the price of related goods
 No new substitute should be developed
 No expectation of further change in prices
 Not a prestigious good
Causes of the application of law of
demand
 Law of diminishing marginal utility
 Substitution effect
 Income effect
 Change in number of consumers
 Diverse use of a commodity
 Expansion of demand vs. increase in demand
 Contraction of demand vs. decrease in demand
Decrease in
demand
Increas
e in
demand
D
D
D
3
3
3
Price of
Ice-Cream
Cone
Shifts in the Demand Curve
Increas
e in
demand
Decrease
in
demand
D2
D1
D3
Quantity of
Ice-Cream
Cones
Exceptions to the Law of Demand
 Conspicuous necessities
 Giffin’s Paradox
 Commodities of prestige
 High priced commodities
 Expectation of further change in price
 Ignorance of consumers
 Emergencies
Normal Good – demand rises as income rises and vice
versa
Inferior Good – demand falls as income rises and vice
versa
 A positive sign denotes a normal good
 A negative sign denotes an inferior good
 Goods which are complements:
 Cross Elasticity will have negative sign (inverse
relationship between the two)
 Goods which are substitutes:
 Cross Elasticity will have a positive sign (positive
relationship between the two)