ECONOMICS is the study of human beings, as they live, move and think in the ordinary business of life. It is the study of economic problems of people living in a community.
It is the art and science which studies those activities of social, real and normal human beings, which are related to wealth.
It is basically a human study concerned with an organisation of society for the production & distribution of wealth.
It is the science which studies human behavior with an aim of meeting max objectives with limited resources.
MONEY:
Money is anything which has general acceptability, and passes freely from one end to another, as a medium of exchange, and is generelly received as a final discharge of debits. It is a form or medium of exchange eg coins, currency etc.
Functions of money:
->Link bw prod and consumption ->Medium of exchange ->Unit of accounting ->regarded as a store of value->measure of value -standard of different payments
Qualities of good money:
->general acceptability ->durability ->portability ->homogeneity ->Stability of value
Different kinds of money:
*paper *metallic *intrinsic value money *cheques *pay orders *drafts *convertible money *credit cards
Appreciation and depreciation in the value of money:
*inflation of currency *cost inflation *deflation *demand inflation *hyper inflation
WANTS: It is the desire which can be fulfilled, and is backed by the ability and willingness to fulfill.
Sources of wants:
*desire for the minimum goods necessary for existence
*Desire to maintain standard of living
*desire for distinction and excellence
*aesthetic sense
Characteristics of Wants:
*generally unlimited
*capable of being satisfied
*vary in urgency and intensity
*recurrent
*present >future important
*knowledge increases wants
*determined by social standards and tastes
Necessities, Comfort, Luxuries
DEMAND:
The desire to possess a thing, coupled with the means of purchasing it, and the willingness to use the means for a purpose. Demand schedule of an individual or market is the list of amounts of commodities they will purchase at a particular place or time.
Elasticity of Demand:
It describes the degree of responsiveness of the demand for a particular goods to fall in its price. It referes to values: EOD<=>1.
Factors that affect EOD:
*Type of goode: demand for luxuries is elastic
*Existence of substitutes
*no. of uses of a particular good
*Time element: if use can be postponed
*Price of commodity: high-elastic, low-inelastic
*taste and traditions
*demand is inelastic if expenditure on good is only a small % of income
SUPPLY: It is the commodity that is called for into the market over a particular period of time at a certain price.
UTILITY: *correlated with desire or wants
*may be defined as its value in use
*capacity of a commodity to satisfy human wants
Marginal Utility: Amt of satisfaction to be obtained from the possession of a little bit more of it
Law of diminishing utility: It is the law of life that states that, every addition to the person's stock of a commodity possesses less and less utility.
PRODUCTION:
It is any process/procedure developed to transform a set of input elements like en, materials, capital, information and energy, into a specified set of output elements, like finished goods in proper quantity and quality, thus achieving objectives of an organization.
*Changing situation of a goods
*changing possession
*provision of services
4 factors: land, labour, capital, organization
LAND: Material and forces which nature gives freely, for human beings' aid. It includes surface and ground (soil and subsoil), oceans and rivers, minerals, air, heat, light, climate etc.
characteristics:
*Land is gift of nature, cannot be produced in required quantity
*its value is determined by location
*fixed, cannot be increased
*itself does not act in production process
*passive factor. acted upon by man and machine
*no production possible without land
LABOUR: Human efforts employed in production-
*skilled and unskilled
*mental and manual
*supply of labour
Characteristics of labour:
*indispensable
*differs from land and capital, since it is supplied by humans
*perishable
*money can be invested in labour for acquisition of skills
*cannot be transferred easily from one skill to another
CAPITAL: Wealth used for purpose of producing further wealth.
Characteristics:
*Result of savings
*Wears out with passage of time
Functions:
Makes the workers produce, by providing them wages
*Provides tools, raw material, land
*Keeps production going, buy providing seed money/running expenses
*efficiency
ORGANIZATION: Brings land, labour and capital into most effective coordination, in order to achieve desired objective.
Goals:
*Capacity to manage production with greatest economy and highest profit, sound technical knowledge, foresight, to estimate future trends, select the right kind of labour.
*Creation of healthy competition among workers
*Localization of industry
QUALITY: It is a term explained wrt the end use of the product. A component is said to be of good quality, if it works well for the equipment for which it is designed.
CONTROL: It is a system of measuring and checking a phenomenon. It suggests when, how often, and how much to inspect. It incorporates a feedback mechanism, which explores the cause of poor quality and takes corrective action.
A QCS performs inspection, testing and analysis to conclude whether the quality of each product is as per laid quality standards or not.
It is called Statistical QC when stats techniques are used to control or solve QC issues. SQC makes inspection more reliable, and at the same time, less costly. It also analyzes and collects data in accessing and controlling product quality. It is based on the theory of probability.
Components made on the same machine and of the same batch vary due to machine characteristics.
SQC uses 3 scientific techniques:
*Sampling inspection, analysis of data, control charting
WAGE PAYMENT PLAN:
Wage is defined as the payment for the use of labour. It includes both monetary and non monetary payments.
Fair pay is a wage paid to a worker, which is fair wrt the work accomplished by him, and which is sufficient to fulfill the basics of life, based on his standard of living in the particular society to which the worker belongs.
Time wages, Real wages.
A good wage is one that satisfies the worker, and brings profit to the management. Wage plans are of 2 types:
*Non-incentive (partially)
*Incentive (only)
TYPES OF INCENTIVES:
*Direct: Given to person who has performed
*Group: Given in a group
*Financial: Bonus, profit sharing, Employer Stock Option Program
*Non financial: promotion, job security, good working conditions, job satisfaction, respect and recognition, training and other employee improvement pgms, housing, medical, recreational, educational opportunities.
OBJECTIVES OF A WAGE PLAN:
*should be profitable to workers and mgmt
*should help in increasing production
*should reward workers proportional to their contribution
*an incentive scheme should provide recognition to a worker for good contribution
*incentive scheme shuold improve and aid utilization of equipments, materials and services
*any wage scheme should improve relations bw employees and employers
DRAWBACKS OF WAGE PLANS:
*incurs extra cost for org
*any wage scheme will lead to disputes/heartburns
PROCESS OF PRODUCTION:
Products are manufactured by transformation of raw materials into finished goods. Productn, planning and control systems are based on many fns:
*forecasting
*order writing
*product design
*process, planning and routing
*materials control
*tool control
*loading
*scheduling
*work dispatching
*progress reporting
*stock of goods
3 most important internal factors for scheduling:
*materials, equipment, manpower
PRODUCTIVITY: Ratio of output and input. analogous to efficiency.
WHY SHOULD PRODUCTIVITY BE INCREASED:
Management:
*to produce profit
*to clear loans, debts
*to sell more
Workers:
*Higher wages
*Better working conditions
*Higher standard of living
*Job security
*Satisfaction
Customers:
*Lower price of products
FACTORS AFFECTING PRODUCTIVITY:
Human resource: Govt can help by putting more emphasis in production related areas. Motivating employees to get educateed, safe working conditions. Labour unions and mgmt may be adversaries in productivity.
Technology & capital investment, Government regulations, Product design, Machinery & Equipment, Production volume
