5. Welfare definition

5.1. Read the text.

Later definitions evolved to include human activity, advocating a shift toward the modern view of economics as primarily a study of man and of human welfare, not of money. Alfred Marshall in his 1890 book Principles of Economics wrote, "Political Economy or Economics is a study of mankind in the ordinary business of Life; it examines the part of the individual and social action which is most closely connected with the attainment and with the use of material requisites of well-being."

The welfare definition was still criticized as too narrowly materialistic. It ignores, for example, the non-material aspects of the services of a doctor or a dancer. A theory of wages which ignored all those sums paid for immaterial services was incomplete. Welfare could not be quantitatively measured, because the marginal significance of money differs from rich to the poor (i.e. $100 is relatively more important to the well-being of a poor person than to that of a wealthy person). Moreover, the activities of production and distribution of goods such as alcohol and tobacco may not be conducive to human welfare, but these scarce goods do satisfy human wants.

6. Management Fundamentals of Business

6.1. Read the text.

Economics is the study of how economic agents or societies choose to use scarce resources for satisfaction of unlimited wants. It examines how resources can be optimally distributed to satisfy the needs of individuals and society as a whole. Knowledge of economics helps businesses become more profitable through proper allocation of resources. It helps governments take budgetary and trade related decisions. To make clear understanding of the changing business environment managers need to analyze economic problems at two levels - microeconomic and macroeconomic. 

Economics Managing helps to understand both micro-economics and macro-economics and their application in the business environment. Background to management theory:

the value chain; competitive forces and positioning; market dynamics; the manager’s functions in a dynamic, interrelated and continuously changing work environment; global management issues; principles of strategic decision-making; a world view of the information age; analysis of complex problems through systems thinking; systemic principles and methods of organizational development; the case method as a mechanism to explore complexity and cross-functional characteristics of business challenges.

2. Key points to remember:

• Every accounting transaction affects at least two items and preserves the basic

• Utility-maximizing rule states: consumers decide to allocate their money incomes so that the last dollar spent on each product purchased.

• Prices will tend to fall when the quantity supplied exceeds the quantity demanded.

• When producers are willing to supply the same quantity as buyers are willing to buy, the market is at equilibrium point where both the buyers as well as the sellers are agreeable to the price level.

2. Answer the questions.

1. How many does every accounting transaction affects?

2. What does Utility-maximizing rule state?

3. What happens when the quantity supplied exceeds the quantity demanded?

4. What is the equilibrium point?

5. When is the market at equilibrium point?