Many people think that economics is very hard to understand. The complex terms, calculations, formulae’s and other things. Basically economics move around the concepts like good, service, utility, value, price and wealth .So in this blog we will learn about these concepts.
Highlights:
* Economics: Definitions of economics
* Basic concepts of economic
Economics basically means household management. The
economics has been defined by the different economist (scientists) in different
approaches and concepts. Each definition will be revolving around the
particular concepts .So let’s study them:
1. Wealth Definition of Economics:
Economics is an enquiry into the nature and causes of
the wealth of nations (by Adam Smith) .It is the practical science of
production and distribution of wealth (by J.S.Mill).
2. Welfare Definition of Economics:
Economics is the study of mankind in the ordinary
business of life: it examines that part of individual and social action .Which
was closely connected with the attainment and with the use of the material
requisites of well-being (by Alfred Marshall).It say that wealth was not an end
itself but a means of achieving the welfare (it’s a source of attaining human
welfare).
3. Scarcity Definition of Economics:
Economics is the science which studies human behaviour
as a relationship between ends and scare means which have alternative uses (by
Robbins). Here ends means human wants and means are the resources with which
wants were fulfilled
4. Growth
Definition of Economics:
Economics is the study of how men and society choose, with or without money ,to employ scare productive resources which could have alternative uses, to produce various commodities over time, and distribute them for consumption now and in future among various people and group of society (by Samuelson)
Basic Concepts of Economics:
GOODS : Goods that satisfies a human want. They are tangible and material outcome of production. Further goods were categorized based on four criteria viz., supply, transferability, consumption and durability.
A. Based on Supply: Based on supply criteria we have
1. Free goods: Which were free gift of nature and for
which supply will be greater than the demand .For these goods no price needs to
be paid.
Example: Air, Sunshine, Rainfall etc.
2. Economic goods: These goods were produced through
human efforts and were purchased at a given price .For these type of goods
supply is less than demand.
Example: Machinery, Furniture etc.
B. Based on Transferability: We have the transferable
and non-transferable goods.
1. Transferable goods: These are the things or goods
which can be transferred from one person to another person.
Example: Land, Building, Chair etc.
2. Non-transferable goods: These are the things or goods
which cannot be transferred from person to person.
Example: Degree certificates, License, Friendship etc.
C. Based on Consumption: We have consumer goods and
producer goods .
1. Consumer goods: These are the goods of first order
which gives direct satisfactions after their usage.
Example: Food, Cosmetics etc.
2. Producer goods: The goods which helps to produce
other goods. From consumer point of view they give satisfaction indirectly.
Example: Machines, Raw materials etc.
D. Based on Durability:
We have the mono period and
poly period goods.
1. Mono-period goods: The goods which are used only
once to satisfy a need.
Example: Food items, Seeds, Fertilizers etc.
2. Poly –period goods: The goods are used times and
again and can be made use of several times.
Example: Machinery, Implements etc.
SERVICE:
A service is any act or performance that one party can offer to another.
Services are intangible, non-material, inseparable, variable and perishable.
Example : Services offered by the Doctors, Lawyers, Teachers etc.
UTILITY:
After
the goods it is the second important concept of economics. Utility is the
capacity of the goods to satisfy the human wants. Utility is classified into
different kinds.
1. Form Utility: By changing the form of a good
greater utility can be created .They offers a high value to the goods.
Example: Processing of Paddy into rice, cotton in to
cloth etc.
2. Place
utility: By virtue of its position in an area commodity will have different
utilities. Mostly the goods were transported from the production places to the
consumption places.
Example: Apples from Himachal Pradesh were transported
to the southern and western parts of the country thereby increasing the utility
of the apples.
3. Time utility: Any time gap between production and
consumption of commodities will create time utility. Through Storage over time,
greater utility is created for the products.
4. Possession utility: Commodities in the hands of
producers have some utility and by the time they reach the consumers through
the traders their utility is increased. For example the vegetables, fruits etc.
from farmers to the consumers.
VALUE:
It is the capacity of a good to command other
things in exchange .For a good to have value it must possess utility, must be
scare and it should be transferable or marketable .
PRICE:
When
the value of a good is expressed in terms of money we call it price.
WEALTH:
It
consists of all potentially
exchangeable resource of satisfying human wants. Anything which has value is
wealth. Wealth may e of different type viz.
1. Individual wealth: All the tangible and intangible
possessions of the individuals, apart the loans due to them.
Example: Lands, Cars, Buildings etc.
2. Social wealth: Its wealth collectively used by all
the people in a nation. These were also called as collective or communal
wealth.
Example: Roads, Railways, Libraries etc.
3. National wealth: It is an aggregate of all the individuals’
wealth and collective wealth of the country.
Example: Rivers, Mountains etc.
4. Cosmopolitan wealth: The wealth belongs to the
world but not to one country. It’s the sum total of wealth of all nations.
Example: Oceans.
5. Negative wealth: These were the Exclusive debts
owed by the individual’s and the nation.
For understanding the economics, one should know about
the basic concepts of economics like goods, services, utilities, values, prices
and wealth .Knowledge about these will help the person in better understanding
of the economics.
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