Chapter -1
(In tro du ctio n)
, Eco nom y: An economy is a system which provi
des people, the means to work and earn a living
.
Eco nom ics: It is a social science whi.ch studies
the way a society chooses to use its limit ed reso
urces,
whic h have alternative uses, to produce goods
and services and to distr ibute them among diffe
rent
groups_ of people.
Scar city: It refers to the limita tion of supply in
relation to demand for a com mod ity. It refers to
the
situation, when wants exceed the available resou
rces. As a result, goods are not readily available
and
society does not have enough resources to satis
fy all the wants of its people.
Eco nom ic Prob lem: Economic problem is a prob
lem of choice involving satisfac_tion of unlim ited
wants out of limite d resources having alternativ
e uses. The 3 main reasons for existence of econ
omic
problems are:
• Scarcity of Resources: Resources are limited
in relation to their demand and econ omy cann ot
produce all what people want . It is the basic reaso
n for existence of economic prob lems in all
economies.
• Unlimited human wants: Human wants are neve
r ending; they can never be fully satisfied. As soon
one wan t is satisfied, anot her new want emerges. as
But all wants cannot be satisfied due to limit ed
resources. Due to this reason, people allocate their
resources in orde r of preference to satisfy some
of their wants.
• Alternative uses: Resources are not only scarc
e, but they can also be put to various uses. It make
choice among resources more impo rtant . s
Cen tral Prob lems of an Eco nom y (Allo catio
n of Reso urce s): it-refers to the prob lem of
assigning the scarce resources in such a manner
so that maximum wants of the society are fulfil
led. -
• Wha t to produce: This problem involves selec
tion of goods and services to be produced and the
quan tity to be produced of each selected com mod
ity. Every econ omy has limit ed resources and thus
cann ot produce all the goods. More of one good ,
or service usually means less of others.
• How to produce: This problem refers to selec
tion of technique to be used for prod uctio n of good
s
and services. generally, techniques are classified
as: labor intensive tech niqu e and capit al-in tens
ive
technique. In labo r intensive technique, more labo
r and less capital (machines etc) is used. In capit
intensive techniq_ue, there is more capital, and less al
labo r utilized.
(In tro du ctio n)
, Eco nom y: An economy is a system which provi
des people, the means to work and earn a living
.
Eco nom ics: It is a social science whi.ch studies
the way a society chooses to use its limit ed reso
urces,
whic h have alternative uses, to produce goods
and services and to distr ibute them among diffe
rent
groups_ of people.
Scar city: It refers to the limita tion of supply in
relation to demand for a com mod ity. It refers to
the
situation, when wants exceed the available resou
rces. As a result, goods are not readily available
and
society does not have enough resources to satis
fy all the wants of its people.
Eco nom ic Prob lem: Economic problem is a prob
lem of choice involving satisfac_tion of unlim ited
wants out of limite d resources having alternativ
e uses. The 3 main reasons for existence of econ
omic
problems are:
• Scarcity of Resources: Resources are limited
in relation to their demand and econ omy cann ot
produce all what people want . It is the basic reaso
n for existence of economic prob lems in all
economies.
• Unlimited human wants: Human wants are neve
r ending; they can never be fully satisfied. As soon
one wan t is satisfied, anot her new want emerges. as
But all wants cannot be satisfied due to limit ed
resources. Due to this reason, people allocate their
resources in orde r of preference to satisfy some
of their wants.
• Alternative uses: Resources are not only scarc
e, but they can also be put to various uses. It make
choice among resources more impo rtant . s
Cen tral Prob lems of an Eco nom y (Allo catio
n of Reso urce s): it-refers to the prob lem of
assigning the scarce resources in such a manner
so that maximum wants of the society are fulfil
led. -
• Wha t to produce: This problem involves selec
tion of goods and services to be produced and the
quan tity to be produced of each selected com mod
ity. Every econ omy has limit ed resources and thus
cann ot produce all the goods. More of one good ,
or service usually means less of others.
• How to produce: This problem refers to selec
tion of technique to be used for prod uctio n of good
s
and services. generally, techniques are classified
as: labor intensive tech niqu e and capit al-in tens
ive
technique. In labo r intensive technique, more labo
r and less capital (machines etc) is used. In capit
intensive techniq_ue, there is more capital, and less al
labo r utilized.
