DEFINITION

Economics comes from the words oikos and nomos, a study of household activities. The basic idea is to study a theory of choice under scarcity, i.e. to choose from -

• Unlimited wants (desires) with limited resources i.e. means to satisfy them
• To make a choice between:

• Providing resources for education, health defence, consumption etc.
• Individuals’ choice to spend on different types of commodities in a market with limited income.
• Firm's choice to produce a commodity from different possible combinations of inputs etc.

Note: 

• Firm - a production enterprise for example Reliance, Airtel etc
• Inputs Raw materials and other things used in production. There are four primary inputs: land labour, capital and entrepreneurship.

A more formal definition of Economics is as follows:

• "Economics is a behavioural or social, science in large measure it is the study of how people make choices"

WHY SHOULD WE STUDY ECONOMICS?

We study economics to appreciate how to make choices under scarcity in order to achieve best allocation of resources. We also study it to find the best method to distribute the resources.

Economic Activity and Non Economic Activity:

• Economic activities are those activities which are undertaken for monetary gain. In other words, activities undertaken for earning income are called economic activities. Non-economic activities are those activities which are undertaken for personal satisfaction or for social services and not earning money. 
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POSITIVE VS NORMATIVE ECONOMICS:

• Positive economics talks about “What is” whereas normative economics talks about “What ought to be” or “what should be”. Positive economics talks about the things happening or might happen in the economic world. Normative economics gives value judgments about things and tells us to “What should have happened”.

TYPES OF ECONOMICS:

• The easiest way to understand the depth and breadth of the subject, is to divide it in two broad divisions ie microeconomics and macroeconomics

• Microeconomics: It deals with the functioning of an individual and industries and the behaviour of individual economic decision making units business firms and households. Firm's choices about what to produce and how much to charge, and households choices about what and how much to buy helps to explain why the economy produces the things it does. Through the study of microeconomics, one can answer questions like, why does poverty exist? Who is poor? Why do some jobs pay more than others? 

• Macroeconomics: It looks at the economy as a whole. Instead of trying to understand what determines the output of a single firm or industry or the consumption patterns of a single household or a group of households, macroeconomics examines the factors that determine national output, national product.

Microeconomics looks at the individual unit, the household, the firm, and the industry. It sees and examines the trees Macroeconomics looks at the whole, the aggregate. It sees and analyses the "forest."

Types of Economy: 

1. Capitalist Economy: In this economy, what is to be produced, how much to produce and at what price to sell it all determines the market,the government has no economic role in it.
2. Socialist economy: The origin of this economy was in opposition to the popularity of the capitalist economy, in which production supply and price are all decided by the government. Such economies are called centered planned economies which are non-market economies.
3. Mixed economy: There are some characteristics of the state economy, and some of the characteristics of the capitalist economy, it is a mixed form of both. After the end of World WarII, many countries of the world which came out of the clutches of colonialism adopted a mixed economy Like Country Included (India, Malaysia, Indonesia).

Sector of Economy:

1. Primary Sector: 

• The sector of the economy is directly dependent on the environment. These activities are related to natural resources like groundwater vegetation and minerals.
• The Activities of Agriculture, animal husbandry, fisheries, mining and allied activities are covered under it. The nature of the enumerated labor is indicated by (red color job).

1. Secondary sector:

• The sector of the economy that uses the primary sector products as raw material in its activities is called the second sector. Such as iron,steel industry,textile industry,vehicles,electronics,etc. Infact, manufacturing work is done in this sector,due to which it is called the industrial sector.
• Skilled workers engaged in this are placed under (height collar jobs) whereas in the production process,directly hired workers are placed under(blue collar jobs).

1. Third sector:

• Various types of services are produced in this area such as insurance, banking, medicine, education, tourism etc. This area is also known as the service sector.

JPSC MAINS QUESTION

Question: What are the different types of economies, and how do they impact society and markets?