CAIIB ABM Chapter-1 : Fundamentals of Economics, Microeconomics and Macroeconomics and Types of Economies

Paper-1 : Advance Bank Management

Module- A : Economic Analysis

Chapter-1 : Fundamentals of  Economics, Microeconomics and Macroeconomics and Types of Economies

 Economics:

-        It deals production, allocation and use of goods and services.

·      Adam Smith = Father of Modern Economics

                   = Founder of the field of Micro Economics.

-        Wrote book= An Enquiry into the Nature and causes of the wealth of Nations (in 1776)

-        Define Economics as “study of wealth” also known as Wealth Definition.

·      Marshall’s Definition: (Known as Welfare Definition)

-        By  Prof. Alfred Marshall.

-        “Economics is study of mankind in the ordinary business life.”

-        More important given to Study of Man.

·      Robbins Definition : (Known as Scarcity Definition)

-        “Economics is the science which studies human behaviour as a relationship between end and scarce means which have alternative uses.”

-        By Lionel Robbins.

-        Economics= Study of means and ends.

-        Analysis of Definition :

(a)        Man has unlimited wants.

(b)        The means to satisfy human wants are limited.

(c)         Resources are not only limited but have alternative use.

(d)        Man has to make choice.

Branch of Economics

Microeconomics

Macroeconomics

-        Concerned with the  behaviours of Individual entities such as Markets, Firm and Households.    -        It studies “how households and firms make decision to allocate limited resources, typically in markets where goods or services are being bought and sold.   -        Microeconomics analyses the market behaviour of individual consumers and firms in an  attempt to understand the decision making process of firms and household.

-        Concerned with the overall Performance of the Economy.     -        It deals with performance, Structure and behaviour of national or regional economy as whole.    -        It study aggregated indication such as GDP, Unemployment rates and price indices  to understand  “how the whole economy function.”

Book and Author :

Name of Book	Author
1. General theory of Employment, Interest and Money	Maynard Keynes
2. Wealth of Nations	Adam Smith

- Founder of the field of Macro Economics is John Maynard Keynes.