Notes AGRIKA KHATRI

Revision By lc.afoundationdasses.com)
CA Foundation :
Business Economics

Chapter 1 II. :
Nature & Scope

THESE NOTES ARE BEST UNDERSTOOD WITH MASTERCLASS /

F AS TRACK CLASS

•
Economics

Origin work :
Greek : OIKONOMIA

19th Political
Old till
century Economy
:
name

Modern First work :

Adam Smith

Book An into nature &

'

Wealth
"
moving
cause
of
nation
of
1776

starts at (home) micro level Macro (

countylevel)
-
•

GFIBF gift

§
Iiooo Parent + option Book
Dress
Restraint

•
2 problems

a- Human b- Relative gy
Unlimited scarce

wants resource ( to fulfill a)

 •
Problem Solver = Economics

•
Definition
Highest
Relatively satisfaction
Scarce Resources
→
Efficiently →
it
allocated
→ Competing
unlimited &
used / Transformed a
wants
most
convert
& pressing
to
goods wants
services

• Neoclassical Modern
Micro Economic
Vs Economies
Analysis d
d
narrow
focus no more
lacking resource , skill ,
capacity
fixed resource
image tremendous
growth
✓ a
incomplete population on
labor T education
force
Raw material sourer alternate 9
on
Better capital Eovipment
Quantity +
Quality A

Idle Production not constant

capacity ,

Global Financial Crisis soot

* Corona Pandemic 2dg

: .
Economics =
Allocation + Production Increasing Process + Deal with
past negative
fluctuation
 tools from Economics
Helping
•

Eco Issues
• Economic
Analysis
-

Analytical Approach -

Understand -

choose best action

Model / Framework
applied in problem
- +

Not 100% solved Only economic aspect solved

problem
-

Political✗ social ✗

i.
problem solve + measures / decision
making

Business Economics 1 Managerial Economics I Applied Economics

tactical
Economic Tools held in business daily ( estoategic )
,
decision
making operational

Management problem-
decision
making
-

¥
this project ? Ride ? optimum output
survival issue -
best alternative -

desired end -
evaluate all alternatives

economic environment
-

because leinited + alternative -

complex &
changing 1dynamic) +
imperfect / incomplete knowledge
d
Tools Basi Economics
Good methodology +
By .

Eco Basi Practice

Theory
BE + BE is part of
=
a
.

d
V b making new → APPLIED
Busi
fills gap 1 login Economics
Policies
Theory
Integrate tools
 &
Quant Technion
Linear Prog
Regression
Cap Birdy
Break Even Analysis
Cost Analysis

Applied Economics Micro Economics

Applying
→
on

ME Heart Goa BE
of
• =

BE is AE
part of
•
a

y
consumer behaviour .
firm behaviours
analyse &
help ( microbial
manager in decision
making
" " "

allocating scarce resource

Business Economics → Nature ,

Scope
• BE 2
parts → Micro Macy
12 matters ]
subject

study
= Individual
Behaviour
,
Organization Overall economic
study
wide environment ✓
how make
consumer 1 firm
Economy
✓

decision to allocate ✓
Firm household
+
govt +

small units ✓
Millions consumer -1
units combined ✗ of -
produces
,

Wide environment ✗
 d t
location ,
behaviour of EÑm consumer
GDP ,
eco
growth
GPL
pricing Jnlt rate
eco . condition
Total Word Having export)
.

etc

Employment
BOT , BOP

←
Macroeconomics
BE Microeconomics ⇐ BE ←

9 Impact
P r
T
Background in which
•

r
Mind Influence
Inflation Long Run while
business business
operates
world performance
Interest framing
Trend
Rates Basi
policy

< BE concerned with ME but Macro limp role .

Busi cannot be
away
with

its impact while

doing Micro Business
 Nature & BEL our
syllabus
scope of

-
economic
theory bohot simplistic assumption waale business models

hate train but the real economic world in which

pe based
Vs Practice
managers operate is different Theory
.

BE applies ecologic -1 analytical tools →

Bridge Gap

Science
I f _ -
Art last ) Pragmatic ( practical
E - - 2

Sc Methods & Tests Results rules to be taches practical business

.

are

&
effect relationship practically
-

cause problems
applied
Eco
Theory + Scientific Tools
Decisionsience
of
✓ ✓
✓
-

( Maths stats ,
,

Econometrics)

Normative
-

Kya actual mehaidoemot

matter ( POSITIVE ,
pure science analysis 1 BE positive & & SUKT
anti

normative & 4- suggest

C. caused of affair
"
"

what is
effect state ☒g
.

1 DESCRIPTIVE MKT & Ai REN

.

policy
economic behaviour without
simply formulation F. decision making
PRESCRIPTION about &uTÑaT principle
any me raise economic

91182T DESIRABILITY)
✓ apply kiazae

Value judgement .
PUT EITIUIFEP 0097470 B£-
DESCRIPTIVE .
suggestive like Doctor
 Nature & scope . .
.

Micros Mao0__
kakaamhai Business Roi Bhi vacuum
BE us
manager
-

me Raam nahikarsaklaa
ki help Karna jo predefined
goals meet Raina Chahtehai Managers ko macro factors
analyse Karna hi padegh
MICRO level pe
.

apne
.

i. BE based on ME because it
To understand its impact
micro decision
helps 4
on
making
in dee
making
i. BE ME technical Both Present + future Macsofadm

✓ ✓
Studies →

Interdisciplinary Theory of Market

0MtEnterprises
-

Theory - f -

BE incorporates knowledge BE use Karta heir

from various subjects exist
theory g- jury firms
→

A : Accounts
to maximise
E- :
Econometrics profits
F : finance 1ST .LT
goal)
M : Maths Management Market

theory ofresoueceallocation
, ,

o
s
:
operation Research
statistics

✓
:
 most which
•
problems a

SCOPE BE
of manager faces at 2 Levels
are covered BE
by

operation contend
Internal
Micro Issues Environmental
Macro Issues

Internal issues of management ke

control Me Hein

cost
Issues
product service
price profit
:
, , ,

choices
demand risk
,
supply ,

Micro Jssue ① ②
Inventory
Demand Forecast Manage
demand BE methods like
future forecast
Karna hai the basis
on
of ABC analysis
Past .
Simulation eeneiase
Mathematical model
Past me consumer ka
behaviour Kaka then use karke
optimum inventory
the
preferences Kye in Raw mat
no
wastage
determinants me
change WIP
se demand the FG
pekyn change
accurate be Bad tie
i.
Increased profitability
forecast
optimum stock
Right Otyoychnput & output @ minimum cost
time
right me
arrange
tool
BE
guns scientific
for Demand Forecast d- Analysis
I
 @ capital ③ Resource
⑤ Risk & < investment <
Allocation
uncertainty Decision
BE tools like
past data scarce capital & Linear
programming #

dalnenepehkprojutmecqavailabl-evsounes.ve
current.info & competing use of fund utilisation
Beseyoptemum
future prediction
Basis Pe Risk
evaluate investment Decision
& Uncertamityko
Analyse + minimisation Pohiyoy allocating capital good
plan Best Rod

uncertainty
future
= Risk
of
µ

⑦ Market structure
⑥ Production
Pricing Policy
& .

Cost Analysis
desired level of output structure
sepatakemo
semaaiinumpregit ki
competition kyahai
cost #
minimumposibk fir market Power
meapna
I determine ability to determine
Prodntheory
2 -
:
input-output Ñ2dT theirs

prices product design marketing

,

Ippropu.at#
desired level
Prieeehoy
"
:
diff market condition
Technology of output
.

me price determination
Least cost ↳
mix
syllabus
input
costth_oy→ndysis_
"
cost ka diff
"
behaviour
diff
 ⑧ Profit Analysis

profiting .
→
future profit planning
which means
Market condition &
bone Pe
Prices change Profits
Kitna Impact honey

Macro / butanol / Environmental

Present future
control ✗
Management
-
•

Tune Policies to these ADVISE EFFECT

according
• Micro :
ELSE
- -

S T L E
P E

Political Economic Trend Economic

stage of in
law system Business cycle Policy
type mature
NI By Govt
Employment
capitalist startup price industrial

socialist social anv saving competition

eli wealth investment fiscal
labor ,
'

income ineouehht FTP

socio-economic
organisation
( Unions , cooperative)

( education + income -1
occupation + Power
status
-1
)
 Unit Basic Problems Price Mechanism
Economy
2 +
of
→

We studied that Natural

Capital consumer manmade
money
&
• -

, , , ,

time are scarce + alternate use

-
-

.
Economic problem

Resource
single no
problem
•
=
use

°
Ad economic system ( 81s / Mixed) =
this problem of scarcity + attends
me
= Central Problem

till at + Postal
• Central Problem of economics = ⑨
§ destination At
I. AT
04TH É future economic growth

WHAT HOI foRWHoM_

How much
-

OR consumer? Labor intensive what share

capital for
Technical

Qty ? oh different
class
school / wheat /machine/ capital-Intensive of people
? relative in cake nation
doth 1
hospital . . . . .

•
FOP & price of
of
each oire above
•
all section
•
Availability need satisfy✗
-
Social interest
Best available Res
•
use
of
 EconomicGrowthPwvisum_
not all consume
today
else production capacity of future Bl
future Income →

living standard *

SAVE -1 SACRIFICE TODAY = Feltre Progress

-
• Above Production & Esteem & Exchange of good I services ke lie To

Devices / ArrangementsKei Late Hein Tisse ultimately Ecoriornic

Milli Hai

EconomKSYSTE.NO
Choice →

Capitalist socialist mixed

 French ( Fitt BUT)
-

capitalist / Free Market / Laissez Faire / No Gout anteversion

Economy
Germany
USA Uk

Modern Global Important (Predominant E S I

Economy ka most 2 -

private property dependent (= all P&D&E means put 4)

• -

profit driving force =

•
government ✗

egg
•

•
India = ?

Characteristic Merit Demerit , ,

How solve Problem
,

QQ many %
← GOVT
Rights
< ←
a.
consumers .

king
-
• •

if ←
property own : -

19 competition
0@
☒
Economic choice
A

STORY :

•
Economic choice hai consumption Karol wore / Production 1 Exchange .

Producer Kisi Bhi Type ki Enterprise Khole

Consumer Decide Kare

Kya Produce + Kitna Produce & choose
freely
They are
King Because They decide Economy Resouse allocation

& Producers Consumer ve

Preference Pelham Rate
Economic
Profit Motive Drive Karta Producer Ko To Do
Activity
Par Competition Bhi Bohot hai 1 Healthy competition Brings out Best )
 Private ( Productive factors
Producers ko bike lie
Property
needed note & freely
personal name me use + own haste

Government un Producer + Consumer ko self ctnterest &

Price mechanism Pe Kam kalnedeta automatically without

Direction + No / some Restriction

any

How problem solved ?

Govt not deciding .

No central ring authority .
chaos in
country ?
No -

plan
uses ampersand Market DIS force OR Price mechanism or market Mechanism

whet + how much , How > For whom

2 -
= -

show consumer
Buying capacity
preferences
yep
consumer

DemTmdt Pricer
(L / C) Income -1 Work -1
Producer profithungry Price factor he own

Produce That of
+
Property

consume

saving
_wiJÉ decide
Based on
name

Roi <
.

Investment } Produces : ROG

 Capitalist
✓
self cost to gather ✗
✓ cop to monitor process ✗
operating Efficiency Manual ✗
incentive to work ✓
RI punish ✓

automatic ✓

✓
Eco growth faster Enterpreneurs
Resource optimum ✓

Benefitted consumer ✓ choice ✓

price ✓
alert ✓

Democratic ✓

Demerit
Property Right ✓
Human Right ✗
✓ ✓
lneouahty
✓
Injustice
Misery
✓ Unrest
, Conflict Welfare ✗

Unreal Demand Pattern ✓

Opportunity ✗

labor ✓ True Demand ✗

Enploil
RÑaoeate ✓ ad sales Consumer sovereign✗
myth
-
-

-
Harmful goods
Merit good ✗
Monopoly -

Materialism ✓ stability ✗

Conspicuous / unethical consume Charm)

Environment Degrade ( nature animal

 SOCIALIST / Command Economy I centrally Planned Controlled
/ .

Resources 1 capital consumer) & to use those

•
, planning authority , purpose
to use
,

distribution CPA
allocation
authority ,
production ,
method all owned
by
.
.
.
collective ownership ✓
small firm ✗
for pldfttx
socioeconomic ✓
hunger ✗
consumer sovereign ✗ range of choice I
work
right ✓ choices

eeouautg Relatively 9
accumulation
✗
Differences &

state is sole owner competition ✗

Price mechanism ?

Dhs
Input decide Kaine Me
Primary Production ka :
force kolmpotance
Nahi dia Jslie Price Mechanism Ka Bhi
Primary Rede nahi Because

administered Price hai .

Secondary Role Hai Bas accumulate goods

Ko nikalne Me

Merits

citizen distribution wealth ✓

feeling bond
secure ✓

enploit ✗ Maximum production ✓

business
fluctuation ✗ Wastage ✗

Motive ✓ Class Warx

Balanced Wo Development Cooperative
 standard of
Minimum
living

Demerits

delays ,
redtapiom

Bureaucracy ,
corruption favouritism
,

Property right ✗

cost calculation
good
basis p →

sÉalocatm of resource ✗
>
statemonopdy put monopoly

work disincentive ,
reward ✗

MlXED_ ( almost
every economy)

& market both

features pe
aaj government
ke best
•
majority economies

& ¢0 EXIST )
depend kavrahi ( coexist) dono ke
disadvantage remove

•
not that / not
golden path very uncertain
easy ,

Put
• state
if control >
Put =
Poor
planning . =
If govt control {
Tax on
DEMERIT 9
disproportionate growth .

Efficiency &
corruption on hiapitatsim type
public sector performance to
 Capitalist socialist
put enterprise positive role only
Pvt community Interest
ProfitProperty Important selected

self-interest industry
Freeplayofprofitx
Private
Necessary control on

'm mixed
howmomy sectors 3

Private Public combined / Joint

sectors
allold Not hand + joint PID
just govt pft access

regulation contented
through
policies

MERIT