JAIIB Paper 1 (IE and IFS) Module B Unit 1: Fundamentals Of Economics, Microeconomics, And Macroeconomics And Types Of Economies (New Syllabus)
IIBF has released the New Syllabus Exam Pattern for JAIIB Exam 2023. Following the format of the current exam, JAIIB 2023 will have now four papers. The JAIIB Paper 1 (Indian Economy & Indian Financial System) includes an important topic called “Fundamentals Of Economics, Microeconomics, And Macroeconomics And Types Of Economies ”. Every candidate who are appearing for the JAIIB Certification Examination 2023 must understand each unit included in the syllabus. In this article, we are going to cover all the necessary details of JAIIB Paper 1 (IE and IFS) Module B Economic Concepts Related to Banking Unit 1: Fundamentals Of Economics, Microeconomics, And Macroeconomics And Types Of Economies
Aspirants must go through this article to better understand the topic, Fundamentals Of Economics, Microeconomics, And Macroeconomics And Types Of Economies and practice using our Online Mock Test Series to strengthen their knowledge of Banker Customer Relationship. Unit 1: Fundamentals Of Economics, Microeconomics, And Macroeconomics And Types Of Economies
Economics – An Introduction
Economics is a social science that focuses on the production, distribution, and consumption of goods and services, and analyzes the choices that individuals, businesses, governments, and nations make to allocate resources.
The term ‘economy’ is derived from the Greek word ‘oikonomia’, which is made up of two words: ‘oikos’, which is commonly translated as ‘home’, and ‘nemein’, which means ‘management and dispensation’. Thus, the term ‘oikonomia’ referred to ‘household management’.
Adam Smith’s Definition
Adam Smith, the father of modern Economics, in his book entitled an Enquiry into the Nature and Causes of the Wealth of Nations (1776) defined Economics as a study of wealth. According to him, the subject matter of Economics is the study of how wealth is produced and consumed. Smith’s definition is known as wealth definition.
- According to Prof. Alfred Marshall, the well-known English economist, ‘Economics is a study of man in the ordinary business of life. It is on the one side, the study of wealth and on the other and more important side, the study of man.’ Wealth here means any commodity, which gives man satisfaction or utility or welfare.
- Wealth is the means to welfare. The ultimate purpose or objective of Economics is to promote well-being or welfare. He viewed Economics as a science of human welfare. Hence, his definition is known as welfare definition. Marshall’s Principles of Economics (1890) is a very important contribution to economic literature.
According to Lionel Robbins, ‘Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.’This definition presents Economics as a study of ‘means’ and ‘ends’. The means or resources are less in relation to their demand. How human beings use the scarce resources to fulfil their desires is the subject matter of Economics. Robbin’s definition is known as scarcity definition. The definition of Robbins can be analysed as follows:
- According to Prof Robbins definition, human wants are unlimited. On satisfaction of one wants, another want arises immediately, and this sequence continues forever.
- Robbin’s definition stated that on one side human needs are unlimited yet on the other side, the means to satisfy these wants, like- time, power, money, etc. are also limited. Due to this, many of man’s needs remain unsatisfied.
Alternative Use of Scarce Means
- In Robbins’s view though the to ‘satisfy man’s needs are scarce, yet he has alternative uses. In other words, he can use every resource in various objectives and activities. For example – such a resource like land can be use in many ways, such as it can be used for agriculture or for building a house or to establish a factory etc.
Variation in the Intensity of wants
- Robbins definition states that the intensity of man’s needs is different. Some wants are more intense than the others. Since our means are limited and all wants cannot be satisfied with the limited means; as a result, we have to select some more intense wants from our unlimited wants and the less intense wants have to be either dropped or postponed to a future date.
Microeconomics and Macroeconomics
- Microeconomics is the study of decisions made by people and businesses regarding the allocation of resources and prices of goods and services. The government decides the regulation for taxes. Microeconomics focuses on the supply that determines the price level of the economy.
- It uses the bottom-up strategy to analyse the economy. In other words, microeconomics tries to understand human’s choices and allocation of resources. It does not decide what are the changes taking place in the market, instead, it explains why there are changes happening in the market.
- The key role of microeconomics is to examine how a company could maximise its production and capacity, so that it could lower the prices and compete in its industry. A lot of microeconomics information can be obtained from the financial statements.
The key factors of microeconomics are as follows:
- Demand, supply, and equilibrium
- Production theory
- Costs of production
- Labour economics
Examples: Individual demand, and price of a product.
- Macroeconomics is a branch of economics that depicts a substantial picture. It scrutinises itself with the economy at a massive scale, and several issues of an economy are considered. The issues confronted by an economy and the headway that it makes are measured and apprehended as a part and parcel of macroeconomics.
- Macroeconomics studies the association between various countries regarding how the policies of one nation have an upshot on the other. It circumscribes within its scope, analysing the success and failure of the government strategies.
- In macroeconomics, we normally survey the association of the nation’s total manufacture and the degree of employment with certain features like cost prices, wage rates, rates of interest, profits, etc., by concentrating on a single imaginary good and what happens to it.
The important concepts covered under macroeconomics are as follows:
- Capitalist nation
- Investment expenditure
Examples: Aggregate demand, and national income.
Differences Between Microeconomics and Macroeconomics
|BASIS FOR COMPARISON||MICROECONOMICS||MACROECONOMICS|
|Meaning||The branch of economics that studies the behavior of an individual consumer, firm, family is known as Microeconomics.||The branch of economics that studies the behavior of the whole economy, (both national and international) is known as Macroeconomics.|
|Deals with||Individual economic variables||Aggregate economic variables|
|Business Application||Applied to operational or internal issues||Environment and external issues|
|Tools||Demand and Supply||Aggregate Demand and Aggregate Supply|
|Assumption||It assumes that all macro-economic variables are constant.||It assumes that all micro-economic variables are constant.|
|Concerned with||Theory of Product Pricing, Theory of Factor Pricing, Theory of Economic Welfare.||Theory of National Income, Aggregate Consumption, Theory of General Price Level, Economic Growth.|
|Scope||Covers various issues like demand, supply, product pricing, factor pricing, production, consumption, economic welfare, etc.||Covers various issues like, national income, general price level, distribution, employment, money etc.|
|Importance||Helpful in determining the prices of a product along with the prices of factors of production (land, labor, capital, entrepreneur etc.) within the economy.||Maintains stability in the general price level and resolves the major problems of the economy like inflation, deflation, reflation, unemployment and poverty as a whole.|
|Limitations||It is based on unrealistic assumptions, i.e. In microeconomics it is assumed that there is a full employment in the society which is not at all possible.||It has been analyzed that ‘Fallacy of Composition’ involves, which sometimes doesn’t proves true because it is possible that what is true for aggregate may not be true for individuals too.|
Fundamental Questions In Economic Organisation
Economists address these three questions:
(1)What goods and services should be produced to meet consumer needs?
The answers to these questions depend on a country’s economic system. The primary economic systems that exist today are planned and free market systems.
(2)How should they be produced, and who should produce them?
Ans. In a planned system, such as communism and socialism, the government exerts control over the production and distribution of all or some goods and services.
(3)Who should receive goods and services?
Ans. In a free market system, also known as capitalism, business is conducted with only limited government involvement. Competition determines what goods and services are produced, how they are produced, and for whom.
Market, Command And Mixed Economies
Market Economy/Capitalist Economy
- Capitalism is often thought of as an economic system in which private actors own and control property in accord with their interests, and demand and supply freely set prices in markets in a way that can serve the best interests of society. The essential feature of capitalism is the motive to make a profit.
Socialist Economy/Command Economy
- In socialist countries, the state centralizes and controls economic decisions. A dictator or central planning committee decides what goods will be made, who will make it, how much to make, and who will buy it. The state does not control labor.
- A mixed economic system is a system that combines aspects of both capitalism and socialism. A mixed economic system protects private property and allows a level of economic freedom in the use of capital, but also allows for governments to interfere in economic activities in order to achieve social aims.
Module B Unit 1 FUNDAMENTALS OF ECONOMICS, MICROECONOMICS, AND MACROECONOMICS AND TYPES OF ECONOMIES PDF By AB
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