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Basic Terms:

1.Utility:It refers to want satisfying power of the commodity.It is measured in utiles.

2.Types of Utilities:

• Tototal Utility: It refers to sum total of utility that is received from all units of a commodity.
• Marginal utility: It refers to utility received from an additional unit of a commodity.

Relationship between TU AND MU:

1. When TU is increasing, MU is falling but positive.

2. When TU is maximum and constant, MU is zero 

3. When TU falls but positive, MU is falling and negative.

Functions of one variable

(DEMO)

Reference book: Sydsaeter and Hammond

Play with Graphs- Arihant 

Content plan for Day 1:

Graphs of Functions: Special focus on trigonometric functions. All basic functions like exponential, logarithmic and power functions will be covered.

Linear and quadratic functions: Domain, Range, Notations, optimisation problems.

Functions:

Definition: A real valued function is a function that assigns a unique real number to a real variable x in the domain D. The set of values f(x) taken by x is called the range of f.

Quadratic Functions: A function from R-R(n) taking the form ax(n) + bx(n-1)+ ........ +z , where a,b,.....z belong to R and a is not equal to 0.

Example: x^2+x+1

Linear function: A quadratic function with n=1.

Example: x+1

Domain and Range:

Domain is the input set

Range is the output set

Let us define f: R-R given by f(x)=x

then, The domain is R and the Range is also R.

This function is also known as identity function.

Optimisation:

f(x) = x^2 

We optimise using derivatives.

f'(x) = 2x+2=0

f'' (x)= 2

We thus have a minimum as f'' >0

so, x=0

f(-1) = 2 which is the minimum value the function can take.

1. Like the accounts of a business, national income accounts have two sides: a product side and an income side. The product side measures production and sales. The income side measures the distribution of the proceeds from sales.

2. On the product side are two widely reported measures of overall production: gross domestic product (GDP), and gross national product (GNP).  They differ in their treatment of international transactions. 

3. GNP includes earnings of U.S. corporations overseas and U.S. residents working overseas; GDP does not.  Conversely, GDP includes earnings in the United States of foreign residents or foreign-owned firms; GNP excludes those items. For example, profits earned in the United States by a foreign-owned firm would be included in GDP but not in GNP.

1. GDP includes only currently produced goods and services. It is a flow measure of output per time period—for example, per quarter or per year—and includes only goods and services produced during this interval.
2. Only the production of final goods and services enters GDP. Goods used to produce other goods rather than being sold to final purchasers—what are termed intermediate goods —are not counted separately in GDP.
3. However, two types of goods used in the production process are counted in GDP:

• The first is currently produced capital goods —business plant and equipment purchases. Such capital goods are ultimately used up in the production process, but within the current period, only a portion of the value of the capital good is used up in production. (In GDP, the whole value of the capital good is included as a separate item. In a sense, this is double counting because, as just noted, the value of depreciation is embodied in the value of final goods. At a later point, we will subtract depreciation to construct a net output measure)
• The other type of intermediate goods that is part of GDP is inventory investment — the net change in inventories of final goods awaiting sale or of materials used in the production process.  These additions should be counted in the current period as they are added to stocks so that the timing of national product is defined correctly

1. Consumer-durable goods (TV, freeze)
2. Non-durable consumption goods (Food items, clothing)
3. Consumer services (Medical service, haircut)

1. Business fixed investments (for purchase of capital goods)
2. Residential construction investments
3. Inventory investments

1. The foreign sector will be omitted. This makes GNP and GDP are thus equal. The terms GNP and GDP are used interchangeably except where we see the foreign sector.
2. We assume that national income and national product or output are the same. The terms national income and output are used interchangeably throughout.
3. Depreciation is ignored (except where explicitly noted). Therefore, the gross and net national product is identical.
4. We assume that all corporate profits are paid out as dividends; there are no retained earnings or corporate tax payments. We assume that all taxes, including Social Security contributions, are assessed directly on households.
5. Net Tax Payment = Tax payment - Government Transfers
6. Personal disposable income(YD) = National Income(Y) - Net Tax Payment (T)
7. GDP(Y) = C + Ir + G (The subscript ( r ) on the investment term is includedbecause we want to distinguish between this realized investment total that appears in the national income accounts and the desired level of investment spending)
8. By ignoring interest paid to business: YD = Y - T = C + S (People use money to consumption and saving only)
9. From 8: Y = C + S + T  
10. Hence GDP(Y) = C + Ir + G .= Y .= C + S + T
11. This identity states that expenditures on GDP (C+ Ir + G) by definition equal dispositions of national income (C + S + T)

By division of labour we mean specialisation in work.  Under it the worker specialises either in the prouduction of a single commodity or single sub-process . It is a system whereby the operations necessary to make a finished product are so minutely divided that each worker performs one or at the most only a few operations. 

Types of division of labour: 

1 . Product based division of labour: When a worker specializes in the production of a particular commodity or service, it is called product based division of labour. 

2. Process Based division of labour:  in a modern economy, production of a good or service involves several processes and each worker specializes vin one or two processes. This type of division of labour is known as process based or complex division of labour. 

3. Geographical division of labour: Sometimes due to some reasons, the production of certain goods takes place in a particular place, state, or country This type of division of labour is called geographical division of labour. 

Factors of Production (FOP) 

Production of goods & services requires the use of certain resources. For eg : to produce whearc, a farmer needs land, labour, seeds, fertilizer, etc. So in this example land, labour, seeds and fertilizers are the factors of production. 

Characteristics of FOP: 

1. Jointly used in the production of a commodity: No single commodity can produce anything. We will have to combine all the factors together to produce something. 

2. Physical Existence: all the four factors of production have a physical existence. They are tangible resources. 

3. Use of factor services: An important characteristic of factors of production is that it is the services of the factors, rather than the factors itself, that contribute to production. 

4. All the factors are not equally mobile: Labour and entrepreneur are mobile factors of production, as they can be transferred from one place to another. On the other hand land is immobile. 

Classification s of FOP : 

1.Land : land is a basic factor of production, because in every type of productive avtity land is needed. It is also a passive factor because it has to be used by labour and entrepreneur, for producing something. 

2. Labour: Labour means all types of human work, physical and mental, done with a view to earn money. 

3. Capital : all man made durable goods, which are used for further production of wealth are included in capital. Capital is a produced means of production. 

4. Organisation : land, labour, and capital are natural, human and material means of production. No production is possible without bringing these factors of production together and using them in right proportions.  

• What is mean by mariginal cost? 
• What do you understand by micro economics? 
• What do you mean by macro economics? 
• What is supply? 
• What is the basic difference in between supply and demand? 
• what is TFC? 

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GDP is Gross Domestic Product. It is the total value of goods and services produced within the boundaries of a nation in a given time period. E.g. 1 year

The value of goods and services produced by both Indian and foreign National are taken into account.

GNP is the Gross National Product. Here the difference is the fact that boundary restriction is not there. However, the values produced by Indian national residing anywhere in the world is considered.