Concept of Opportunity cost

Today we will discuss the concept of opportunity cost with the help of examples.

The concept of opportunity cost was developed by Austrian school of economics. Later on it was popularized by American economist Devenport. Continue reading “Concept of Opportunity cost”

Difference between positive economics and normative economics

Last time we have discussed the types of economics. Today we will discuss the difference between positive economics and normative economics. Let us discuss it:

POSITIVE ECONOMICS:  

It deals with the economic issues of past, present and future and tells about what was, what is, what would be. Positive economics is basically based on the facts and figures which can be verifiable.

For example India is the second largest populated country; it is a positive statement nobody can deny it as it is based on the facts and figures.

NORMATIVE ECONOMICS:

It deals with the opinions of economists related to the economic issues and tells about what ought to be. Normative economics is basically based on the opinions which can’t be verifiable. For example there should be the development industries in underdeveloped countries to make them developing countries. So this statement is just an opinion and it is just a judgment.

I hope you have understood the difference between positive economics and normative economics.

Types of Economics

The term economics is very common and Economics can be broadly classified into two parts:

MICRO ECONOMICS: in microeconomics we study “I” which means individual. It means in micro economics we study everything from the point of view of individual. The word micro itself means small. In micro economics we study individual firm, individual producer, individual consumer etc. Continue reading “Types of Economics”

Features and Criticism of Economics as a Science of wealth

Economics is considered as science of wealth as it is a study of the factors which are responsible for wealth generation. Thus in Economics we study a body of knowledge which relates to wealth. Economics as a science of wealth Economist Adam Smith, J. B. Say, John Mill, F. A. Walker and Riccardo. Adam Smith is known as a Father of Modern Economics and 1776, he has written a book called “An Enquiry into Nature and causes of wealth of Nation”. Continue reading “Features and Criticism of Economics as a Science of wealth”

Central Problems of an Economy

Human wants are unlimited and the resources to satisfy these wants are scarce. Every individual tries to satisfy more and more of his wants. The scarcity of resources in relation to wants give rise to the problem “how to use limited resources to get maximum satisfaction”. This give rise to problem of choice which means we have to select the best alternative among all. The central problems of an economy is further divided into four following basics problems: Continue reading “Central Problems of an Economy”