1. Economics: An Introduction

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microeconomics class 11 sandeep garg chapter 1 pdf

What is Economics

Economics An Introduction

Economics is the study of how people use limited resources to satisfy unlimited wants. It tells us how goods and services are produced, distributed, and used in daily life. All human beings are engaged in some activity or the other in order to satisfy their wants and desires. For example – farmers are busy in their field, workers are working in factories, professionals (like CA’s or Doctors) are busy in their profession. Depending on wants, all human activities can broadly be divided into two categories:

1. Economic Activities
2. Non-Economic Activities

1. Economic Activities – Economic activities refer to those activities, which are undertaken to earn a living. For example – shopkeeper selling goods in his shop, doctor attending to patients in his clinic, etc.

• Consumption – consumption is an economic activity which deals with the sue of goods and services for the satisfaction of human wants. Eating of bread, drinking of milk, wearing watches, listening music, etc. are consumption activities.
• Production – production is an economic activity which includes all activities undertaken to produce goods and services for generation of income and satisfying human wants. The activities of farmer, carpenter, trader, teacher, doctor, shopkeeper, etc. all come under production.
• Distribution – Distribution is that economic activity which studies how income generated is distributed among these factors of production, i.e. how a part of income generated will go as rent for use of land, wages to labour, interest to owners of capital and profits to the entrepreneur.

2. Non-Economic Activities – Activities which are not concerned with creation of money or wealth are known as Non-Economic activities. For example – housewife cooking food for her family or a teacher teaching his own son.

Some more examples of non-economic activities performed in the economy are:

• Charitable Activities like blood donation camps, free education to needy students;
• Social Activities like get-together, attending parties;
• Political Activities performed by different political parties;
• Religious Activities like praying to God.

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Definition – Economics is the study of how man and society choose, with or without the use of money, to employ scarce productive resources, which could have alternative uses, to produce various commodity over time and distribute them for consumption now and in the future among various people and groups of society.

Scarcity – Scarcity refers to the limitation of supply in relation to demand for a commodity. It is a situation when human wants exceed the available resources. As a result, goods are not readily available and society does not have enough resources to satisfy all the wants of its people. Scarcity is universal, i.e. every individual, organisation and economy faces scarcity of resources.

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Economic problem – The 3 main reasons for existence of economic problems are:

• Scarcity of Resources – Resources (i.e. land, labour, capital, etc.) are limited in relation to their demand and the economy cannot produce all that people want. It is the basic reason for the existence of economic problems in all economics.
• Unlimited Human Wants – Human wants are never-ending, i.e. they can never be fully satisfied. Human wants also differ in priorities.
•  Alternate Uses – Resources can also be put to various uses, which makes choice among resources more important.

Nature of Economics –

1. Economics as a Science – Science is a systematic body of knowledge that studies cause and effect relationship with universal validity. Economics is also a systematic study of knowledge and facts and deals with cause and effect relationship, and its laws are generally accepted.
2. Economic as an Art – Art means the skillful use of knowledge to achieve desired results, learned through study, observation and experience. Similarly, economics applies its laws and principles in real life with human imagination.

Short Answer Types Questions

1. Briefly discuss the meaning of economic and non-economic activities.

Answer:
Economic activities – Economic activities are those activities which are performed to earn income or livelihood.
Non-economic activities – Non-economic activities are performed out of love, affection, sympathy or social service without the motive of earning money.

2. Discuss the three main economic activities.

Answer: The three main economic activities are:

1. Production – Creation of goods and services.
2. Consumption – Use of goods and services to satisfy wants.
3. Capital Formation (Investment) – Increase in the stock of capital goods for future production.

3. Explain welfare definition of economics.

Answer: The welfare definition of economics was given by Alfred Marshall. According to him, economics studies human activities related to the earning and use of wealth for promoting material welfare. Wealth is a means to achieve human welfare.

4. Discuss briefly the definition of economics as given by Adam Smith.

Answer: According to Adam Smith, “Economics is the science of wealth.” It mainly studies the production, consumption, exchange and distribution of wealth. He regarded wealth as the central subject of economics.

5. Briefly discuss the most accepted definition of economics.

Answer: The most accepted definition was given by Lionel Robbins. According to him, economics is the science that studies human behaviour in relation to unlimited wants and scarce resources having alternative uses. It focuses on the problem of scarcity and choice.

6. Write a short note on nature of economics.

Answer: Economics is a social science which studies human behaviour related to production, consumption and distribution of goods and services.

Nature of Economics:

• Economics studies human wants and their satisfaction.
• It deals with the problem of scarcity of resources.
• It involves the process of choice among alternative uses of resources.
• It is both a science and an art because it explains economic laws and their practical application.

7. Discuss in brief the following terms: (i) consumers; (ii) Service Holder; (iii) Producer.

Answer –

(i) Consumers – A consumer is a person who uses goods and services to satisfy his/her wants. The main objective of a consumer is to get maximum satisfaction from available resources. Example: A person buying and using food, clothes, or books.

(ii) Service Holder – A service holder is a person who works for an organisation or employer and receives wages or salary in return for his services. Example: Teacher, doctor, bank employee.

(iii) Producer – A producer is a person or organisation that produces goods and services to satisfy human wants. The main objective of a producer is generally to earn profit. Example: Farmer producing crops or a factory producing goods.

8. Discuss the main reasons for existence of economics problems.

Answer: Economic problems exist because human wants are unlimited, whereas resources available to satisfy these wants are limited.

The main reasons are:

• Unlimited Wants: Human wants keep increasing with time.
• Scarcity of Resources: Resources like land, labour and capital are limited.
• Alternative Uses of Resources: Resources can be used in different ways, creating the problem of choice.

microeconomics class 11 sandeep garg chapter 1 pdf

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