Production Consumption And Transfer Of Wealth Economics Essay

Introduction:

With reference of Oxford dictionary economics means the branch of knowledge concerned with the production, consumption and transfer of wealth.

With the purpose of satisfying wants, whatever activity aimed at getting money is called economics activity. Activities other than are Called non economics activities. For example a teacher giving private coaching and getting money, a nurse attending a child are economic activity but a mother teaching her son and bringing him up is non economic activity. Human wants motivate him to undertake an economics activity. Because human wants are not automatically satisfy. Therefore human wants are considered as a mother of economics activity. In order to understands this, we should know the process of evolution of economics activity.

Evaluation of economic activity:

Man initiated an economic activity as a wandering hunter. With the passage of time, he acquired knowledge and this thus started the work of animal husbandry. A farmer cultivated land, a trader doing business, a skilled worker and industrialist running a factory. With the evaluation of economic activity began the age of commerce and the age of industrial Revaluation. On the basis of the level of development of economic activity the world was divided into two:

Develop Countries

Developing Countries

In this sense, the growth of economic activity was manifold. This does not mean that economics problem does not arise because of abundance. However, economics problems emerged because of abundance are totally different nature. At this juncture, we do not indulge into their details.

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Definitions:

Adam Smith: Mr Adam Smith is the father of economics. According to him ‘Economics is a science of wealth’. He emphasise material wealth by presenting all necessary goods as wealth. In this manner, he correlates productive labour to material wealth. Men produces wealth. He utilises, exchanges and distributes this wealth. In order to understand man’s association with this kind of wealth. Economics studies production, consumption, exchange and distribution and principles governing these activities.

Adam smith’s thought as regards creation and distribution of wealth has close connection with modern concept like determination of income and employment levels and economic growth. Thus, Adam Smith’s science of wealth holds good even today.

Prof. Alfred Marshall: Prof. Marshall has accepted Adam smith’s concept of material wealth but according to Prof. Marshall, wealth is a means and human welfare is an end. Accordingly, he has presented different definitions of Economics.

He believes that Economics is a science of welfare. It studies the ordinary business of man. An ordinary business is nothing but wealth getting using activities. Over and above this in Marshall’s view, economics studies material means and their utilization with reference to individuals and social behaviour closely related to these means.

Robbins: According to Robbins, Economics is a science of the scarcity. It is also science of economising. The central theme of the study of economics is the study of economic problem. Nature has not provided sufficient means to satisfy all human wants. It, therefore, becomes necessary for a man to decide as to which means are to be used in order to satisfy different wants. In this sense, according to Robbins, economics is a science of scarcity and it studies the process of allocation of resources in order to satisfy wants. In this sense economics studies man’s behaviour in relation to unending but gradable wants and limited resources having alternative uses.

Factors Responsible for Economic Problem:

Concept of Economics: To understand the basic concept of Economics we need to understand the nature of Economics. While understanding the nature of economics, certain question are to be taken in account like: is economics an art or a science?

Economics – An art

Economics is an art like art of photography. The art of photography provides rules and regulations to get a good photograph. Similarly economics provides rules and regulation to assist increasing material welfare or economic growth.

Economics is normative, objective and a rational science. Alfred Marshall terming wealth as a means and human welfare as an end, describes economics is a normative, objective and rational science.

Economics represents necessary rules and guidance as to how welfare can be obtained. For example demand theory gives us a principal substitution. This low helps us to get maximum satisfaction in terms of the expenditure which we desire to make over and above through the theory of equilibrium; economics shows us the way to get optimum position.

Economics is an arts to the extent that it helps to solve our day to day problems. Economics as a social science is widely way, economics can presented as a science?

Economics – A science

Like science, casual relationship is there in economics. A systematic data collection, classification and analysis is undertaken in economics. Economics provides details of a given subject and gives proper shape to knowledge after detailed examination and experimented. Like science it study, economics gives prime importance of hypothesis and not to imagination. Like science it is neutral ends. It utilises both inductive and deductive methods of analysis and draws some specific principals. Moreover, industrial and vocational objectives are measured in terms of money are presented in quantitative formulas. In this sense, economics is a complete science. It is both pure and applied science.

Reasons to prove whether economics is science or not?

Economics cannot agree on any matter. The number of opinion exceeds the number of economists.

Unlike chemistry or physics, economics does not precisely predict abouit any future event. However, If we concentrate ground realities, it can be said that economics is a science.

Thus we have got perfect idea about Economics now next step has to be taken to understand supply and demand.

Methods of Economic Analysis

How the Laws of supply and demand interact with the Economy:

Economics helps us to understand how we allocate limited resources towards the purchase of goods and services. Since we are not able to purchase everything we want with our limited resources we must make choices. Economists are interested in how we choose to fulfil our wants and needs given the scarcity that exists. How does a nation function with limited sources? What determines what determines what purchase they will make given the constraints they are subject to?

To complete understand how our economy function. It is a good idea to learn about the basic concepts of supply and demand.

Demand:

Everybody requires goods or services to satisfy his wants. This kind of desire is generally considered as demand or for goods and services, but in economics desire is not demand. For example a cart puller can desire for a big bungalow, but he has no economic power to purchase it, his desire cannot be his demand. Even though desire and purchasing power are there but in the absence of readiness to purchase desire cannot be a demand. Demand is always at a given price and a given time.

In other words Desire + purchasing power + readiness to purchase at a given price and a given time is demand.

Determinants of Demand

Law of Demand: “Other things remaining constant, at a lower price quantity demanded is more than quantity demanded at higher price.” The quantity purchased by consumer at higher price is comparatively less the quantity purchase at lower price.

Supply:

Units of commodity which are produced by the producer are called production. Some part of the total production kept in a warehouse by the firm is called stock and the quantity which is brought to the market for sale is called supply. The law of supply is as important as the law of demand.

Supply is always at a price and with reference to time.

Determinants of supply

Law of supply: “Other things remaining the same, the supply at high price will be more as compared to supply at low price.”

Examples:

Linde Engineering Pvt Ltd

The Linde Group is a world leading gases and engineering company with almost 48,000 employees working in more than 100 countries worldwide. In the 2009 financial year it achieved sales of EUR 11.211 bn. The strategy of The Linde Group is geared towards sustainable earnings-based growth and focuses on the expansion of its international business with forward-looking products and services. Linde acts responsibly towards its shareholders, business partners, employees, society and the environment – in every one of its business areas, regions and locations across the globe. Linde is committed to technologies and products that unite the goals of customer value and sustainable development.

The Group comprises three divisions: Gases and Engineering (the two core divisions) and Gist (logistics services). The largest division, Gases, has four operating segments, Western Europe, the Americas, Asia & Eastern Europe, and South Pacific & Africa, which are subdivided into nine Regional Business Units (RBUs). The Gases Division also includes the two Global Business Units (GBUs) – Healthcare (medical gases) and Tonnage (on-site) – and the two Business Areas (BAs) – Merchant & Packaged Gases (liquefied and cylinder gases) and Electronics (electronic gases).

Financial Data

Linde financial highlights

in € million

January  to December

Change

2009

2008

Sales

11,211

12,663

-11.5%

Operating profit1

2,385

2,555

-6.7%

EBIT before amortisation of fair value

adjustments and non-recurring items

1,460

1,703

-14.3%

Earnings after taxes on income

653

776

-15.9%

Number of employees

47,731

51,908

-8.0%

Gases Division

Sales

8,932

9,515

-6.1%

Operating profit

2,378

2,417

-1.6%

Engineering Division

Sales

2,311

3,016

-23.4%

Operating profit

210

267

-21.3%

L & T Ltd.

L&T wins NDTV Profit Business Leadership Award 2009

L&T was voted India’s Best Company in the Infrastructure Sector by India’s leading business news channel, NDTV Profit, and was awarded the Business Leadership Award 2009. The awards acknowledge the most dynamic Indian organisations and the best business leaders whose relentless pursuit of excellence has fuelled India’s journey to the forefront of the world economy. The selection for the awards had a stringent six-stage nomination process. (October 28, 2009)

Corporate Governance at Wal-Mart

Wal-Mart, the world”s leading retailer, is famous for its low prices and its breadth of merchandise. The chain offers food, clothing and a range of other items including electronics, health and beauty products, sporting goods, toys and prescription drugs.

Wal-Mart also sells products on-line. This case deals with corporate governance practices at Wal-Mart with special reference to board composition, board committees, directors” responsibilities, board meetings and directors” compensation. The case can be used for MBA students as part of the corporate governance curriculum. The case aims at helping students understand the processes and systems underlying good governance.

Tesco in the United States

Tesco, a major UK-based retailer, entered the US market in November 2007, opening a small-format store named Fresh & Easy. The case describes Fresh & Easy’s entry strategy, touching on market research, store format, layout, location, etc.

It then discusses some of the criticisms that the store attracted in the US. The case also discusses Tesco’s decision in April 2007 to halt the opening of new Fresh & Easy stores for three months, after 61 stores had been opened. The case ends with a brief discussion on the unfavorable macro environment in the US, with inflation and recession rearing their heads.