Post on 14-Jun-2015
BASIC CONCEPTS
ECONOMIC ACTIVITY
Any activity that involves the use of
scarce resources to satisfy some human
wants is known as economic activity .It
can be classified into three types:
Consumption activity
Production activity
Exchange activity
GOODS
All things that have value and satisfy
human wants are called goods. It is
classified into following types:
Material and Non- material goods
Economic and Non-economic goods
Consumer goods and Producers goods
Intermediate and final goods
Material and Non-material good
Material goods- are tangible i.e. they
can be seen touched and transferred
from one place to another Ex
shoes ,table, machines etc
Non –material goods- are intangible i.e.
they donot possess any shape ,size Ex.
Services of doctors,lawyers, teachers
etc
Economic and Non economic goods
Economic goods- have a price and
their supply is scarce in relation to its
demand . For Ex - land and all
material goods and non- material
goods
Non economic goods- are called free
goods .They are unlimited in supply
and these goods do not have a price.
For ex. Air,water,sunshine etc
Consumer goods and Producers goods
Consumer goods- directly satisfy the human wants For
ex pen milk furniture etc it is subdived into
Perishable consumer goods
Durable consumer goods
Producers goods-are goods which help in the production
of other goods that satisfy the wants of the consumer
directly or indirectly such as machines, plants ,raw
materials it is again divided into
Perishable producer goods
Durable producer goods
Intermediate Goods and Final goods
Intermediate Goods-Goods sold by one firm
to another for further production process
i.e to manufacture final goods is known as
intermediate goods .for example wheat
used by bakery to make cakes
Final goods-goods sold not for further
production but for personal consumption
are called final goods.
UTILITY Want satisfying power of a commodity is
known as utility. Utility is subjective.Types of Utility Form utility Place utility Time utility Service utility Knowledge utility Natural utility
WEALTH AND INCOME Wealth-is the aggregation of all economic
goods and services. It represents the stock
of all economic goods at a given point of
time. However it can vary periodically over
time
Income- is a flow concept and represents
addition to wealth over time . It represents
the aggregate of the economic goods finally
used in the system over a year
MARKET
Market is an institution rather than any
place or location. It refers to a platform
where buyers and sellers come into
contact with each other and exchange
goods and services amongst each other.
It facilitates exchange between buyers
and sellers
EQUILIBRIUM
It is derived from the Latin word
aequilibrium which means equal balance. In
economics equilibrium implies a position of
rest characterized by absence of
change.Scitovsky defines “ A market or an
economy or any other group of persons and
firms is in equilibrium when none of its
member feel impelled to change his
behavior .”