Today we will discuss the law of diminishing marginal utility commonly known as law of DMU. It is known as Gossen’s first law also. It explains consumer behaviour.
According to it as we go on consuming more and more units of a commodity, the utility obtained from every additional unit goes on decreasing. Law can be explained with the help of following example: Continue reading “Law of diminishing marginal utility”
There are two methods of economics
- Deductive method
- Inductive method
Deductive method- classical economists favour this method. It is also known as hypothetical or abstract or priori or analytical method. Under this method there are following steps: Continue reading “2 Methods of economics”
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”
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”