CHAPTER Introduction and Definition of Economics 7 Chapter Contents = What Economics is All About = Economic Activities * Economie and Non-Economic Activities * Types of Economic activities * Purpose of Economic activities * Non-Economic activities ® Definition of Economics * Wealth definition + Welfare definition * Scarcity definition * Growth-Oriented definition Keynes’ Definition * Micro Economics * Nature of Economics importance of the study of Economics in India Project Work Review Questions = Short Answer Questions * Long Answer Questions WHAT ECONOMICS IS ALL ABOUT ? Economics was originally introduced as a science of state craft. It was related with the collection of revenue for the state Ze. Government, After Industrial Revolution in eighteenth century, it was felt that functions of the state should be specified. Thus, political economy * Macro Economics2 ICSE ECONOMICS-Ix, emerged wealth we Tesult of the efforts to define functions of the slate OF ih oer Boanomiog a cmtified as a source and means to satisfy human wants. So, Adant Smaithy father of ies, defined Economies as ‘Science of wealth’. etn is no second opinion to say that the concept of Beonomies ‘81ns Curing different stages of development These stages are ; as subject has been AS A SUBJECT ‘Wealth Aspect ‘Welfare Aspect Scarcity Aspect Development Aspect ‘Later on, on the basis of these stages, different economists classified the definitions of economics, DEFINITION OF ECONOMICS The term “Economics” is originally derived from the ancient Greek word “Oiks” It means houschold and “Nemein® means management. Thus, it refers to managing of a household using the limited funds. The Greeks applied term to the city-state, which they called polis. The classical and neo-classical economists developed it into ‘political economy’, The great philosopher, ‘Aristotle used the term as management of family and he state. Similarly, Indian statesman, Kautilya used the terms both as economic and political activities, In his famous book named ‘Principles of Economics’ Dr. Marshall used the term for the first time in 1890. However, it is not so easy to define economics in a few exact words. Different economists. have defined it in different ways. “political Economy is said to have strangled itself with definitions.” —Prof, J.M. Keynes ‘yyhenever six economists are: gathered, there are seven opinions.” —Mrs, Barbara Wootton Jacob Viner described economics in a very simple way by saying, “Eeonomies is what economists do’. But ‘keeping in view these problems, it is essential to define the subject for scientific and systematic study. Broadly speaking, various definitions can be classified into four groups as under : (i) Wealth definition (Adam Smith) (ii) Welfare definition (Marshall) (ii) Scarcity definition (Robbins) (iv) Growth-oriented definition (Samuelson)INTRODUCTION AND DEFINITION OF ECONOMICS =a |. Wealth-Oriented Definition During 18th and early of 19th century, the classical economists like Adam Smith, JS. Mill, J.B. Say, Walker Senior and others were the first to give a systematic definition of Economics. Adam Smith, the founder of the classical school of economies is famous book ‘An Enquiry into the Nature and Causes of Wealth of Nations’ defined economics as “the science of wealth”. This means all that economics studies is wealth, Jt deals with the acquisition, accumulation and expenditure of wealth, It examines how people earn wealth and spend wealth. “An inquiry into the nature and eauses of wealth of nations” and is related to the laws of production, exchange, distribution and consumption of wealth. —Adam Smith “The practical science of production and distribution of wealth”. JS. Mill “Political economy makes known the nature of wealth.” JB, Say “Beonomics is that body of knowledge which relates to wealth.” —Prof. Walker “The subject treated by political economy is not happiness but wealth”. —W.N. Senior ‘These definitions have, thus, made wealth as the subject-matter and the central point of economics. To them, wealth was everything. Thus, they used the word ‘wealth’ in a narrow sense, It is for this reason, the definition is called wealth definition. Features of Adam Smith’s Definition ‘The main features of wealth definition given by Adam Smith are as under = 4. Study of Wealth : According to wealth definitions given by the various economists, economics is the study of wealth only. Therefore, it deals with the activities of man related to production, consumption, exchange and distribution. 2. Only Material Commodities : This definition conveys the feeling that economics constitutes only material commodities while it ignores non-material goods as air and water. 3, Causes of Wealth : Economics is considered as study of causes of wealth accumulation which brings economic development. In order to increase wealth, production of material goods will have to be increased. 4, Much Stress on Wealth : The main aim of the political economy is to increase the riches of the economy. Thus, it gives more stress on wealth, not on anything else. 5, Economie Man : These definitions are basically based on the man who is always aware of his ‘Self-interest’. Self-interest leads to material gains. Therefore, such a man is called Economic Man. Criticism Many economists like Carlyle, Ruskin, Charles Dicken and William Morris did not agree with wealth definition of economics. They called it as the Science of Bread and Butter, Gospel of Mammon, Dismal Science and Bastard Science.ICSE ECONOMICS-IX Thus, we: . ealth definition of Adam Smith is not free from shortcomings & stated below : rat wealth is the sole end of all for man's happiness and 1. Only Materi: human beings, naliaic Definition, This definition expla Welfare 8S But in teaity, wealth is wot an end in itself. 1 9 ean 2N, : 2. Narrow view of the scope. This definition places wealth in the forefront and means in * welfare. The definition the back; h en ackground, It has ignored the most urgent aspect of economics ¥ definit is therefore, incomplete as it takes into account only wealth for study. It ignores man’s welfare. 3. Concept of Economic Man : Adam Smith's wealth definition is based on the concept af economic man who works for selfish ends alone, It is not found in real life. In real practice, man’s activities are not only influenced by selfish motives put also by moral. social and religious factors. Thus, economies studies a common man and not an economic man: 4. No study of the prablem of Scarcity and Choice : This definition has ignored the study of economic activities namely (1) Searcity (2) Cholce. Infact, economic activi w® take place because not of goods and services satisfying human wants which are scaree- But they have several uses, This gives birth to the question of choice. In this way, this definition neglects both on wealth, Secondary aspects. ‘This definition has given undue stress subject 5. Secondary Place ta Man place has been given to human beings. Wealth is a mean to human welfare. Thus, its matter does not remain a social science. Il. Welfare-Oriented Definition Prof, Alfred Marshall in his book ‘Principles of Economies’ which was published in 1890, defined as follows : uE-gonomics is a study of mankind in the ordinary business of life, it examines that part of individual and social action which is most closely connected with the attainment and with Thus, it is on one side a study of wealth; on the the use of material requisites of well-being. other and more important side, a part of the study of man.” —Prof, Marshall ‘This definition implies three important aspects (a) Economics is ; in P momics is a stus ordinary business of life, (b) It examines the economic aspect of an ee ' tte 7 u fotions. (c) The attainment of material welfare is the end of economics, The Sune . ists like Pigou, Cannon, William Beveridge and Penson etc, also give similar definitions “The aim of political economy is the explanation of the gencral ait Wi material welfare of human beings depends.” SE NS “Economics is the science of material welfare,” et —Penson Features of Welfare Definition ‘The mai res of material welfare definition are as follows in features of i finition are as foll Ws (i) Study of Mankind , . + Economics is . Wealth is only a mean to satisfy human wants, fhe study of mankind rather than that of wealth. SaINTRODUCTION AND DEFINITION OF ECONOMICS (i) Study : s vit was udy of Ordinary Man : It studies the activities of an ordinary man whe cams wealth and spends it to get the maximum satisfaction. Study of a Real Ma real man who pos: factors in society. es does not study a man who is ever : elfish but studies a ‘several qualities and is influenced by economi and non-economic (iv) Promotion of Welfar 2 It studies the material means which promote human welfare. (v) Study of Science and Art : Material definition deals with economics both as a science and an art. : (vi) Use of Money : This definition considers material or economic welfare as a part of social welfare which can be easily measured with the measuring rod of money. Criticism Marshall’s welfare definition, no doubt, is superior to Adam Smith's welfare definition. Prof. Lionel Robbins attacked Marshall’s welfare definition on the following grounds : (i) Impraeticable. In his discussion, Marshall classified the activities into economic and non-economic. But such a classification is not correct because all activities in one way or the other have an economic value. Prof. Robbins considered the discussion of economic and non- economic improper. (ii) Unseientific, According to Prof. Robbins, this definition is unscientific. Marshall explains one kind of behaviour als distinct from another in a haphazard manner. This makes the subject-matter highly indefinite and uncertain. (iii) Welfare is very Vague. Generally people refer welfare as the material happiness, But in reality welfare is a mental make-up of a person which depends much upon his psychological feclings. Thus, it is highly subjective. It cannot be defined, measured and compared at all (iv) Only Materialistic Aspect. According to Marshall, welfare is attainable only by material means. But Rebbins observed that it is not proper to say that material means alone promote welfare. The services of doctors, teachers, lawyers, domestic servants etc., also do promote welfare. These services have nothing to do with material g: (v) Limited Scope. Marshall narrows down the scope of economies by making it a mere study of material means of welfare. If economists were to study the materi 1 means of welfare to the exclusion of non-material means, economics would definitely become narrow im its scope. (vi) Economies is not concerned with Ends. Assuming economics as a normativ' nce, Marshall made welfare as the end of economies. This implies that economics is concerned with ends. As such it makes judgement whether an end is noble or desirable or undesirable and so on. (vii) No Proper Explanation, This definition fails to explain the main economic problem viz, the problem of how to satisfy the unlimited wants with limited means which have alternative uses.{cK ECONOMICS 1x, Definitions = pofinition (Marshal) vg human wollare as & subject. |. Adam Smi cle 4. Mars! rogarcod ith regarded wealth as a subjectmattar) 1. MUTT onomnics: of economics. importance to man. 2. Adam Smith provided more importance to weal. 3, Wealth is both means and an end. 4, Adam Smith has given more emphasis om Production of wealth. 5. Economics is a study of economic man. 2. Marshall provided more \ 3, Wealth is only a mean 4 | Marshall has givan tion of wealth. more emphasis on consump! 5. Economics is a stud Ill. Scarcity-Oriented Definition Lionel Robbins formulated a new definition it Significance of Economic Science’ published in the year 1932. “economics is a science which studies human behaviour as 2 relationship between ends and scarce means which have alternative uses.” —Lionel Robbins “Geonomics is fundamentally a study of searcity and the problems rise to.” “Economics is a seience concerned with the administra n his book “Essay em the Nature and which scarcity gives —Sionier and Hague ion of scarce resources.” —Seitovosky ‘Thus, many economists like Stigler, Samuelson, Osear Lange, Scitovosky have supported Robbin’s scarcity definition of economics. Features of Robbins Definition Prof. Robbins’ definition has the main features as : (i) Numerous wants or unlimited wants. According to Prof. Robbins, human wants are various and numerous. When one want is satisfied, another want takes its pl Since human J, man is compelled to select the most urgent wants for immediate satisfaction. wants are unl (i) Scarcity of Means. Human wants are unlimited and means to satis sThe means refer to goods and services which we use to satisfy our Wants, The means ane searce The mcfeposal If these means are abundant like free goods, there would be then no aa problem. But they are scarée and one is foreed to posipone some of one's wants aeooniine ta s wwants according them are limited, priority. (ill) Alternative use of Means, The scarce means are ca $ are capable of — be waed for several purposes. For example land which mab ein be Ger ee can ie house construction, playground et, Similarly all the economic means or used for cultivation. ons ive uses, Therefore, all goods can be put to alternative uses, OEP ive Uses, (iv) Economic Problem. The multiplicity of wi s : ‘ants a . . the alternative uses impose an economic problem. The Oe pervicatton of se 8 how to satisfy unlimited wantsINTRODUCTION AND DEFINITION OF ECONOMICS 17 | with limited means which have alternative uses. Robbins describes this problem as the problem of economising scarce resources (¥} Science of Choice, The problem of economising resources leads 10 another problem viz. the problemi of choice. Since wants are numerous and means are scarce, we have to choose the most urgent Wants from the numerous. In this way, the scarcity of means makes the choice necessary. That is why, Economies is described as a “Sefence of choice”. Superiority/Merits of the Definition Robbins’ definition is superior to Marshall's welfare definition on the basis of the following arguments : 1, More Scientific. Prof, Robbins explains economics as an exact science. Thus, he calls economics as positive science. This science has nothing to do with goodness or badness of economic activity. It is only concemed with unlimited wants and limited sources. It does not make any difference between economic and non-economic, material and ordinary and extra-ordinary business of life. 2, Scarcity Definition is More Wide, Marshall in his definition limits the scope of economi to the material means of welfare. But Robbins studied behaviour connected with the problem of scarcity. Thus it makes its scope wider. 3. Study of Human Behaviour. This definition gives clear cut view of human behaviour. Ir studies the human behaviour of an individual as well as of the saciet 4. Unive! Robbins’ definition is a universal definition of economics. It is applicable 10 all individuals, groups, and society. Moreaver, it deals with the problem of unlimited wants and scarce means. This problem is common every where. 5. More Logical Explanation of Economic Problem. Robbins’ definition is more logical in explaining the economic problem. According to this definition, economic problem arises due to scarcity of means in relation to their demand. Criticism Robbin’s scarcity definition is more scientific than welfare definition. It has its own shortcomings. Robbin’s definition has the following drawbacks : 1. Robbins’ Definition is too Wide. Robbins’ definition of economies extends the scope 10 all activities of mankind that are related to the problem of choice. The problem of choice as such is found not only with social beings but also with non social beings like Sadhus, 2. Only Abstract. When economics is not concemed with ends, economics becomes both theoretical and abstract. 3. Economie Problem not always arises from Seareity ; Some critics are of the opinion that economic problem also arises from the abundance of goods as well. For example. during the great depression of 1930's it was not the scarcity but abundance of goods in U.S.A. that created the econome problem in the world,ap Sy ob + oe - gCONOMICS Ix « os becames merely an intellectual sblems. In this way, sonyoinie Lio solve many pre * versions © ys anicreste “A Unipenetionl, attowving Robbie Sereise. Nut in a practical life, nna ts sl Robbing” detinition i really. 5. Nat Appticnt ss Th is asa aire {plicable to highly rieh countries whe have ple sean 4 that Rabbbins’ definition iso vs, te other words, there is no cnitifil pesouree’ y of rescue: ed Robbins? definition alist set-up, 4. Tnapplicable in Sackalist en the jsromnd that in socialist comtries, this detint oVerHIenE is responsible far provicliny basic te rshall’s and Robbins’ Defi | Marshall's Detinition (1) Unsciontitic dofinition because it explains one Kind of bohaviout distinet from another, (2) Limits tho scope as it lays emphasis on material af wall Basod on valuo judigemont and thorofore lead Comparison of Ma Robbins’ Definition (1) Sciontitic definition as it explains any behaviour undor one aspect. (2) Widor in scope as it connects any behaviour with scarcity. (2) Considers economics as neutral between ends, Thorotore free fram any confusion. ‘ (a) Its universal in nature as it is applicable to all individuals, groups and sociely. It deals with limited resources and unlimited wants. Economics is only a positive seiance. Wis not of universal charactor, (5) Economics is both a science (positive as woll ‘as normative) and an art. (6) Marshall's dotinition is classiticatory, (6)_ Robbins’ definition is analytical, ilarities between Marshall's and Robbin’s Definition Similarities and Dissi Similarities 1. Main Focus on Man : Marst says that it is on the ome Hand Robbins have mainly focussed on the study of ide a study of wealth as well as a telationship between uses, Thus, bot focus on the study of man, man, Mars js and sewree me: 2. Rational behaviour of the Man: Both definitions are b nal behaviour OF the man, Marshall assumes that the man abw: wellure while Robbins that ratio ns which have alterna en Jon the sumption of ays aims at maximising his sutisfuction, 3, Wealth and Searce Means ¢ Marshall considered wei Robbin meaning. 4, Normative and Positive Seiene and Robbins calls il pe ail man (ries to maximise hi: ilth as material Welfare wher hh the words: convey the ised scarce ments in place of wealth, However, by ame Marshall cog jenee, Thus both coonomi: Hers cconamies as normative scien pnsider economies x a science,INTRODUCTION AND DEFINITION OF ECONOMICS Dissimilarities 1, Distinetion between Social and Human Science : In the opinion of Marshall, economics ie @ science which studies normal social human beings. But for Robbins, it is a human science aiming at the economic activities ic. ordinary or extra-ordi 2. Difference between Economic and Non- Activities : According to Marshall, S are those which are related to material goods and those promoting welfare are non-economic activities. Robbins says that all human activities are economic activities where there is a problem of choice. In this way, Robbins’ includes all material and non-material goods in economic definition is more wider in scope activities, as it 3. Normative and Positive Science : According to Marshall, economies is. a normative Science as it values the welfure of human beings. But Robbins considers it as a positive science He remarked that the function of an economist is to explain not to condemn, In this way, there is a sharp difference in two opinions. 4. Classificatory and Analytical ; According to Marshall, human activities can be classified in ordinary—special ; material—non-material and welfare—non-welfare. But Robbins considers it analytically as to why does economic problem arise ? Thus Robbin’s definition is certainly Superior to that of Marshall’s. 5. Economic Welfare : Marshall held the view that economic welfare may be increased in the society but according to Robbins, economics has nothing to do with welfare. 6, Practical and Theoretical : Marshall's definition is more real and fruitful for making economic policies while in contrast, Rebbins’ is more technical and of an abstract nature, KEYNES’ DEFINITION The earlier economists have studied economic activitiesiproblems at individual level (micro level). They ignored significant aspect that economic problems are also related to the society as a whole. But, economic concepts have changed altogether during last fifty years. Ke “General Theory of Employment, Income and Interest” has made remarkable contributi this regard. He considers that economic activities must be dealt with individual and a whole (macro level). “Economics is a study of administration of scarce means and the determination of employment and income.” eS ‘Therefore the economic problems must be dealt at micro and macro level, Keynes elassified Economics into two parts : (a) Macro Economics (b) Micro Economics LoMacro Economics ang large. AS name The word macro has been derived from the Greek word “makros". It means studies Suggests, it covers the study of the whole economy. It the behaviour af not one particular unit, but of income, aggregate supply etc. ch of economi ken together such as national all the units ta : t with aggregates of “Macro economics deals not with individual quantities as ache A with individual these quantities, not with individual income but with national ine nat —Boulding price, but with price level, not with individual output but with na | faa paltia? soebey: By Tt must be remembered that according to Keynes, an ee jean ier of economics. following economics on macro and micro level, we can widen the subj Micro Economics ¢ studies the economics Micro economics is the branch of elements of economic acy s ’ i ual UNITS. actions and behaviour of individual units and small groups of individ “Micro economics is the study of particular firm, particular household, individual price, wages, income, industry and particular commodity.” —Bouiding i ivi a household, firm or prices of various i momics deals with an individual, a housel br sia od te heen: Here it must be noted that an individual is the part of a society and final oods an - : oul is the welfare of society. IV, Growth-oriented Definition Robbins’ definition of scarcity took static view of economic problem. It was only positive ie, analysing the economic problem arising aul of scarcity. But modern economists feel He ecuonios “ehoulel/alda: HUBER hOW:garce:meanacaresused 1% ns optimum util definition. isfy more wants and to ion of resources. This aspect has been dealt with the growth-oriented “Economics is the study of how people and society end up choosing with or without the use of money, to employ scarce productive resources that could have alternative uses to produce various commodities over time and distributing them for consumption, now or in the future, among various persons and prow ps in society. It analyses casts and benefits of improving patterns of resource allocation," —Prof, Samuelson Main Features of Samuelson’s Definition ‘The growth-oriented definition of econon has the follows iB fe (i) Economie Res ur rees : This defi They natural, human or physic alternative uses, EMtied problem lies nition deals with the economic Fesources which are fire used to satisfy human Wants, They are s¢; ree but have of Resources the resources have making choie shave allemative uses but the main allemative meg . rot te rocey means should be mili AINTRODUCTION AND DEFINITION OF ECONOMICS pit (iii) Full Utilization of Resources : Prof. Samuelson has included the time element. ‘Thus, it makes efforts for full utilisation of resources. (iv) Increase in Productivity : Another feature of this definition is that it must increase productivity resulting in an increase in economic growth, employment and higher standard of living. In short, Prof. Samuelson’s definition of economics is comprehensive to earlier definitions given by Adam Smith, Marshall and Prof. Robbins. It is because it highlights the important issue of economic development of modem world. Again this world is dynamic which goes on changing over time. Nature of Economics In order to understand the nature of economies, we shall have to examine the basis of approaches adopted by Marshall and Robbins in detail. Marshall considers economics as the study of man’s activities in relation to wealth, It is the study of how man carns and spends. “Economics is a social science. It does not study individuals who are isolated or cut off from society’. —Marshail “Economics is concerned with the utilisation of scarce means, having alternative uses, for attaining multiple ends.” —Robbins He, therefore, further added : “Economics is the oldest of the arts, the newest of science—indeed the queen of all the social sciences.” Keeping these facts in mind, Prof. Robbins called it a social science rather than human. science. According to him, economics is a systematic study of human behaviour. In brief, economics is both Science as well as an Art, The question whether economies is a science or an art, there are different views. The English economists of the classical school hold the view that economics is a science. But the economists of Continent Europe, Germany and India regard economics as an art. “Economics is the oldest of the arts, the mewest of sciences—indeed the queen of all the social sciences.” —Prof. Samuelson Let us discuss the views of both and see exactly what economics is. NATURE OF ECONOMICS Science Art Positive Normative What is? ‘What ought to be? What was? What ought to What will be? have been? odICSE ECONOMICS-IX Economics as an Art Art is completely different from science. “A science teaches us to kno and expounds; art directs, art impos “An art isa system of rules for the attainment of # given end.” The object of an artis the formulation of precepts applicable to policy. This tg eat is practical. In fact, the word art denotes doing something well. ches us to do. In ather words, science explains ” —Cossa JM. Keynes un art tea precepts or proposes rules For example, the theory of consumption guides the consumer to obtain maximum satisfaction with his given income (means). In this sense, economics can be considered as an art in the wider sense. It means creation or practical application of knowledge. It is for this reason, we treat economics as an art. In nutshell, we can conclude the discussion that economics is both a science and art. Economics as a Science The term science has been defined as the science of systematic body of knowledge about a particular branch of the universe. It presents the relationship between cause and the effect. This implies that a science is a study of a branch of learning and not of the whole universe. Applying this to our subject, we find that economies is built upon facts, examined and systematised by economist: Further, economics like other sciences deduces conclusions or generalisation after observing, collecting and examining facts, Thus, it deals with (i) Observation of facts, (ii) Measurement Explanation (iv) Verification. In short, it formul: onomi Jaws about human behaviour. «Economies is therefore a science pure and applied rather than a Science and an Art.” —Marshall The economics as a science can be divided into two parts fe. (a) Positive science and (b) Normative science. I. Economies is 2 Pasitive Science + A posilive science establishe cause and effect. [t tells us that if we do a certa picture of facts without any comments. relation between thing, same result will follow, It shows the real A positive science explains things as they ai , . Por this reason, it is called as deseriptive science J Economics is A Normative Science : Marshall and Pigou put the argument that economics is 4 normative science. “Economics is a normative science because it has a norm viz.; welfare —Marshall Ts esINTRODUCTION AND DEFINITION OF ECONOMICS i | Therefore a normative science describes what should be done and what should not be done. From this, we can sity that economics is both positive and normative science. It deals with ‘what is’ and ‘what ought to be’. Therefore, it not only focusses why certain things happens, it also conveys whether it is the right thing to happen. Therefore, being normative, it suggests ways and measures to be adopted for the betterment of the society. Economics, Both a Science and an Art Many economists consider that Economies is not an art. Its function is to merely investigate, explore and explain the various inter-related aspects. Thus, it has to do nothing in solving the practical problems. But the careful study shows that Economics does help in solving practical problems and so has the practical utility also, Thus, it can rightly be said that Economics is a science as well as an art. “Economics has given us light (é.e., knowledge) and also fruit. It is light bearing (as such, it is a science) and also fruit bearing (as such, it is an art). Economics is not a science only or an art only, but it is both a science and an art.” —Pigon IMPORTANCE OR SIGNIFICANCE OF ECONOMICS In these days, economics touches every comer of human activities. According to Mrs. Barbara Wootten, one cannot be a good citizen unless one is an economist to some extent. ‘Therefore, importance can be classified into two parts. (A) Theoretical Advances (B) Practical Advances. Theoretical Advantages 1. It helps to Promote Welfare. Economics is the only science that has direct and primary concern with the welfare of masses, According to Marshall, the aim of studying economics is the attainment of material welfare. 2. Economics gives us an Intellectual Value. Economies is mainly concerned with economic problems. Some of the problems like determining wage, interest and profit are very simple, ‘The other problems like currency, finance and of foreign exchange are complex. When we analyse these problems in terms of cause and effect, then it provides intellectual value, 3.11 provides Correct Judgement. The study of economic teaches us to draw correct conclusions from the experience of the past and to formulate proper economic policies. Thus, it gives us correct judgement of every event. 4, Economies gives Cultural Value. The study of economics reveals actual working of economic systems like capitalism, socialism and mixed economy, Thus, study enables the individuals to know their role as producers or as consumers or as workers etc. In turn, it gives us. cultural value of such economic systems.ar F AEA eee wt {CSE BCONOMICS-AX Practical Advantages ‘The practical advantages of economics are stated below * the consumer. A weave " . ics is 10 the i (@) Usetal ta the Consumer. The foremost practical use of ae ‘im satisfaction. Thus, consumer wants to spend his income in such a way that he attains m a commodity. i i ion fro! laws of consumption explain the method of getting maximum satisfaction ua CO if economics js significant for iii) Useful to the Producers. Like consumer, the study ©) from economics, we producers also. Every producer is interested to earn maximum profit. rh cost of production Team haw to raise the profit either by increasing production or by redueins ue : Tt also helps producers to fix the price of their commodity: + elpful to business eisai da . race Ci ity. The study of economics 18 DC Helpful to Business Community. Th se to become an efficient and moderate if community. A good knowledge of economic laws helps hi entrepreneur, (iv) Sa like population, unemployment, unequal disparities etc. (v) Helpful to Workers. A worker is benefitted by the study of economics. A worker comes to know how wages are “Jetermined. The study also provides the knowledge as to how their efficiency can be raised or how exploitation can be stopped. (vi) Helpful in Price Determination. The study of economics is helpful in the determination of price under different market conditions. For example, Law of Demand and Supply are crucial laws to determine the prices con ome ei to or systema zing resources to the maximum. Thus, it ar syteots and frimalateeconoriie policies forthe betterment of society , it helps to fix up ing role to solve many problems, on te Economic Problems. Economics has a leadi é d wealth, poverty and regional distribution of income ant (viii) Useful for Social Workers. The study of economics is useful for social workers. They s mics is 1 i derstand economic problems properly. The study of economics thus becomes most essential u S i «The main objective of economics is to find a solution to the soci 1e social problems.” —Dr. Marshall is also helpful in Ss, governments ado i ptcertain welfare schemes Gx) Helpful to social Welfare Activities, Th ‘ a) Act kno social welfare activities of an economy. eee c knowledge of economic: . " s to give benefits to the weaker section of the societ (x) Useful for All, Thi . The st i ere oes tae study of economics is useful for all individi I: luals. It is the study of ly oF IMPORTANCE OF THE STUDY O Our country j is population is engaged i F ECONOMICS IN INDIA Stage of economi mic devel But ‘clopment agriculture productivity ee SS pee cent 2 though a ; agriculture, =investments under various five year se of low tate OF capital Formation, “The vast pial growth of population 1 great direat to economic nil of living, of the people, ore prosperous, the study car plins for (his purpose INTRODUCTION AND DEFINI development has alse be p wy 1 stagnant in spil ns. ‘The per capita income is also very low bee sources Of Mincrals and human foree ate not properly utilized, Bi posing # great thr COROMIC PrOREESS, se problem prosperity. In order to achieve desired goals of benetits, stising st betterment of the society and for making the country and the people of economics is significant, ‘The government has implemented five y sinee 1951. ‘The main objects of various schemes are given below 5 to soci core and per eapita neo ial ufticieney in foodgeains and ray 1 iv) Redue come andl wealth, (¥) Redressing economie imbalance (vi) Attainment of full employment, ‘onomic stability growth. ng, inequatities 0 (vii) Attainment of | (viii) Achieving sustained economi (ix) Reducing the pp between by (x) Modernisation of the economy, (xi) Self-suffiviency. Recent measures for liberalisation of economy have been announy of the advantages: se aspirations can be fulfilled of modern technological developments for economic progress, But the only when every concerned person is acquainted with economies ane! its fundamental prineiples. MICRO ECONOMICS is that branch of economics which studies the economic actions and nid small groups of individual units, In other words, in micro arious units of the economy do their economic activities and reach Micro economic behaviour of individual units economics we study how the their equilibrium sta According to Boulding : “Micro economics is the study of particular firm, particular hou wage, income, industry and particular commodity To quote Edward Shapiro : “Micro economics deals with small parts of the economy.” sehold, individual price, Scope of Micro Economics The scope of micro economics can be discussed under the following heads + +OR Kea! KL~ WW J Lip Ce dl Ng ig ICSE ECONOMICS-1x. Hiiliond Theory of Demand : Micro economics studies how the demand for a commodity a ‘mined. Theory of demand indicates the consumer's demand and his maximum satisfact shows how consumers distributes his limited income in different goods and service: prices, . 2. Theory of production : It also analyses the theory of production. A firm carties outpy with the help of factors of production, Micro economics under theory of produetion st i production function and laws of production. _ 3. Theory of Factor Pricing : Income earned by the sale of goods is distributed amon, factors of production for their serviees in the process of production. Haw price of each facior of production is determined is a problem that deals with distribution of income. It is only due to this reason, it is studied under micro economics. 4, Optimum Allocation of Resources : Micro economics also deals with the optimum allocation of resources. In other words, it studies how efficiently resources are distributed among producers and consumers. A firm will be in equilibrium at a point of optimum allocation of resources. Therefore, it studies the conditions necessary for achieving equilibrium, 5, Welfare Economies ; It also studies welfare economics, welfare economics spells an ideal economy. It deals with the welfare of the people. Importance of Micro Economics ‘The microeconomics is useful in several ways as: 1. Operation of an Economy. Micto economics explains the functioning of a free explains how millions of consumers and producers in an economy enterprise economy. It s of goods and take decisions about the allocation of productive resources among million services. In the words of Watson : “Micro economies has many uses. of the economy.” 2. Economic Policies. policies calculated to promote efficiency in production. 3. Predictions, Micro econo! helps us to describe the actual economic situation and enable us to predict and suggest policies which would bring about the desired results. 4, Economic Welfare. The objective of the study of micro economics is the allocation of ¢ resources in such a manner that maximum benefits may be flowed to all those engaged in The greatest of these is the understanding of the operatis ‘The study of micro economics helps in the formulation of economic sear the process of production. 5, Solving Specific Probler that are individual in nature suc! lps us not to waste time on collective study. ns, The study of micro economics helps to resolve the problems ‘h as adjustment of cost structure or sales. In such cases, micro economics he _INTRODUCTION AND DEFINITION OF ECONOMICS Limitations No doubt, micro economics has certain advantages but side by side it suffers following drawbacks : 1. Unrealistie Assumptions. The foremost limitation of micro economics is that it is based ‘on many unrealistic assumptions like full employment and existence of perfect competition. But in reality, such assumptions do not hold good in the practical life, 2, Static Analysis, Many critics of micro economics have opined that it is static in nature because it assumes many economic factors are given. For instance, if we know consumer's preferences, only then we can know when the total output from given inputs would be maximum. 3. Wrong Conclusions, Micro economics can not give an idea of the functioning of the economy as a whole. An individual industry may be flourishing while the economy as a whole may be in a bad shape: 4. Abstract Nature, The micro economics is too abstract to explain welfare as the best is achieved only under perfect competition. But, what will happen under dynamic conditions of economic growth is not clear. MACRO ECONOMICS The word macro has been detived from the Greek word “makros” which means large. Hence, macro economics is concerned with the economic system as a whole. It is that branch of economics which studies the behaviour of not one particular unit, but of all the units taken together such as national income, aggregate demand, aggregate supply etc. It is only due to this that it is known as aggregate economics. “Macro economic theory is the theory of income, employment, prices and money.” —Roberston “Macro economies deals not with individual quantities as such, but with aggregates of these quantities, not with individual income but with national income, not with individual price, but with price level not with individual output but with national output.” —Boulding Scope of Macro Economics The scope of macro economics has been explained as under ; 1. Theory of National Income : Macro economics studies the concept of national income, its different elements, methods of its measurement and social accounting. 2. Level of Output and Employment : We analyse the factors that determine the level of national output and employment, National output is a function of employment of resources. In the short run, output varies with employment of labour. Output and employment rise or fall together, At such times unemployment of labour mounts up. At times the economy reaches near full employment level. Keynes analysed the factor that determine the level of output and. employment in the economy in the short run. =ICSE ECONOMICS-IX of Distribution PT try to explain how the national tae 4. Economic Devel | : pment. Economic di cr it analyse the problems and theories of development, Stcpmentis eng ran poses Tn we 5. Theory of Inter ational Trade : [t al lies princi init oe : SO st cl different countries. Tamiffs, protectin ludies principles determining trade among ind free-trade policies fall under foreign trade. 6. Theor; “ig ; employ heory of Money : The changes in demand and supply of money effect level of Smployment. Therefore, under macro economic functions, of money and theories relating to money are studied, 7. Theory of Business Fluctuations : It also deals with the fluctuations in the level of employment, total expenditure and general price level, 8. Theory of General Price Level : A continuous rise in the general price level's called inflation, Inflation hits where it hurts. It distorts production. It increases inequalities in the distribution of income and wealth, The common man is injured by inflation. Deflation is the opposite of inflation. The general price level falls continuously. Output and employment levels fall. Macro economies provides explanation for the occurrence of inflation and deflation, ees mic theories of distribution. These ‘output is distributed among the factor of production. Importance of Macro Economics From the following points, we can easily evaluate the importance of macro economics 1. Working of the Economy. Macro economics is helpful in understanding the functioning of a complicated economic system. It gives a bird’s eyeview of the economic world, 2. Formulation of Economic Policies. Macro economic analysis is of utmost importance for the significance of economic policies, The modern governments depend upon the aggregates of economic variables like national income, total employment etc. for the preparation of economic policies. 3. Solution of Economic Problems. In the pursuit urgent economic problems, this analysis occupies an important place. These problems relate to aggregate output, employment and national income. Economic theory seeks to explain fluctuations in the level of national income, output and employment. Thus, we are able to study the economy in its dynamic aspect. 4, Changes in Price Level. During twentieth century, general price level has undergone wide fluctuations. Rise in price level is called inflation and fall in price level is called deflation. In order to control the changes in the general price level, economists have to seek the help of macro-economic analysis. 5. Study of Trade Cyele. Trade cycles constitute an important economic problem, They relate to economic fluctuations over a period of time in an economy which are due to the fluctuations in total savings, total production ete. Thus, in order to control these trade cycles, the: study of macro economics becomes essential. =INTRODUCTION AND DEFINITION OF ECONOMICS | 19 | 6, Helpful in Economie Planning. Almost all the under-developed countries of the world lay great stress on the importance of economic planning. Macro economic analysis makes it Possible to adopt proper policies and techniques concerning economic planning and to enforce the same. Interdependence between Micro Economics and Macro Economics Micro and Macro economics are the two sides of a coin. There is close interdependence between the two, We cannot analyse the individual behaviour without the knowledge of aggregate. Likewise aggregate cannot be effective unless individual variables are kept under consideration. Micro economics contributes towards macro economics in a number of ways as : 1, Basis of Economie Laws. Micro economics acts as a basis of macro economics because macro is the aggregate of individual units. Similarly, macto theories are used by micro economists. 2. Study of Economic Fluctuations, Business cycles which are universal in every sector, are influenced by both individual and aggregate factors. Unless we review both micro and aggregate variables, we cannot provide a reasonable solution to business cycle: 3. Role in International Trade. In international trade both the approaches are used, Economists have developed their theories on the basis of micro economic theory presuming full employment of resources and mobility of factors of production. However, modem economists Jooked on the economy as a whole, It recognises the role of aggregates. So general equilibrium is nothing but an extension of equilibrium of micro economics. 4. Balance of Payments and Interdependence. Balance of payments problem is also a burning problem for the economy. An individual sector may have favourable balance of payments. On the other hand, the overall position of an economy is to be assessed from aggregate position of all sectors. 5. Impact of Micro Economics on Keynes Economics. Keynes is known as the father of Macro economics. Even Keynes has used micro economic theory to explain the rise in prices as a result of increase in the money supply of the country. Net only macro depends upon micro but also micro depends upon macro, The determination of the rate of profit and the rate of interest are both micro and macro in character. Rate of interest and rate of profit have most effectively been defined by macro economics. ‘Thus, it is clear, both micro and macro economic tools have to be applied to understand economic problems, In short, micro and macro economies are interdependent and both contribute to each other. Though they deal with different subjects, yet there ig a good deal of interdependence between them. Professor Samuelson has remarked that there is really no opposition between micro and imacto economics.Basis | Micro Economics 1. Degree of Aggregation! Micro econamins duals the individ units of economy, like a. firmn, an) agate industry, ete. 2. Objective The objective of mint economics Ib to study the principles, protla policies how to attain optimum princi allocation of resour of newiue 3. Method of Study | Under micro, laws and principl formulated by taking ‘other things ot dia being equal. This ineinod of study ia studi called partial equilibrium analysis’. called ‘ 4, Paradox Micra decisions may not hold true for AS maera seunern the whole economy if an individual whole x00 saves, only he will be benefited, | will reduce consur — income, difference bet concn 5. Alternative Name —_| Its also known ‘Price Theory’, It is also known the "Income Th | | or ‘Employmant Theory. Project Work ‘A. Suppose you ave living in a small village which is situated near indusirial town. Make a vist around and mention what type of economic and non-economic activities are there. Justify your answer wi arguments. B. In modern times, the subject of economics is very important. On the basis of your experienct knowledge of the subject, give your view with reasons on > (a) Theoretical uses of Economics. (b) Practical uses of Economics. (c) Uses of Economics for Individual'Society. (d) Uses of Economics for indians. 2. Collec! data alter meeting twenty five households regarding their basic wants within the period ot ‘one month/three months. () On the basis of information, show which wants they have fultled and which remained untutile? due fo scarcity of resources. (i) On the basis of your experiences, show which activities are economic and non-economic. enINTRODUCTION AND DI NITION OF ECONOMICS: Review Questions A. SHORT ANSWER QUESTIONS Q. 1. What is economics 2 Ans. "Economics is that body of knowledge which rotates to wealth’, “Economics is practical science of production and distribution of wealth G. 2, Give Adam Smith's definition of Economics: ‘Ans, According to Adam Smith, Economics is concerned with “an inquiry Inte the nature and causes of wealth of natians.” itis related to the laws of production, exchange, distribution and consumption of wealth, Q. 3. Explain Dr. Marshall's definition of Econamics. Ans, “Economics is a studly of mankind in the ordinary business of le. It examines that part at individual and social action which is most closely connected with the attainment and with the use of material requisites of well being, Q. 4, Discuss Prot, Robbins’ definition of Economics. or Discuss scarcity detinition af Economics given by Prat. Robbins. Ans, According to Prof, Robbins, “Economics |s a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” Q. 5. Give Prof. Samuelson’s definition of Economics. or Give growth oriented definition of Economics. ‘Ans. “Economics is the study of how people and sociely end up choosing with or without the use of money to employ scarce productive resources that could have alternative uses to produce various commodities over time and distributing them for consumption, now or in the future, among various persons and groups in society. It analyses costs and benefits of improving pattems ot resources allocation." @. 6. Give characteristics of Adam Smith's definition of Economics. Ans. Main Characteristics of Adam Smith's definition are, study of wealth, causes of wealth, study ‘of material commodities and economic man. G. 7, Explain main features of Marshall's definition of Economics. ‘Ans. The main features of material welfare definition are study of mankind, study of ordinary man, study of individual man and study of @ real man. Q. 8. Give main elements of Robbins’ definition of Economics. |Ans, The main elements of Robbins’ definition are : muttialicity of ends of unlimited wants, scarcity of means, allemative use of means, economic problem and science of choice. Q. 9. State Keynes’ definition of economics. ‘Ans, According to Keynes, “Economics is a study of administration of a scarce means and the determination of employment and income.” Q, 10. Point out the main features of growth-oriented definition of Economics.a ea ICSE ECONOMICS-qy ‘ . efficient allocati Ans. ‘The main tostures of growh oriented definitions ave eeanorme resouroes, tion of resources, lull utiization of resoureas and inarease in producthiy Q. 11.18 Economics a Positive Science 7 ‘Ans, Posilive stienco refers itsell to accurate description of phenomenon, it expiains what is, how works and what aro its effects, t means it studies What, HOW and Why ? ine the economist studies the choice, ho dous mot judge them, On this ground, eeonomic [auvs are verifiable, Q. 12, ts Economics a Normative Science ? — Ans. According to Dr. Marshall, Pigou and many others, economics Is a normative science. It means a regular science of a body of sysiematised knowledge relating to criteria of what ought to Be ang Contemned with the ideal as distinguished from the actual. The object of normative science Is the determination at ideals G, 13, Give the importance of Economics. fans. Tho importance of economics is of twa types Le, Theoretical and Practical. Thearetioal uses o economics implies as it helps to promote wellare, correct judgement, cultural value and usetul to politicians and statesmen. It is also practically useful for consumer, producer, worker and business community, Q. 14. What is the nature af Economics ? ‘Ans. The nature of economics means whether its subject-matter Is sclence or art. It can be both. it is science, then it is bath positive and normative. Q, 15, Is Economics a Science 7 ‘Ans. According to some economists, economics is a science because it always tries to know the causes and elfects of a particular phenomenon. It is a systematic study which makes observation measurement, explanation and verification. Q. 16. What Is Micro Economics ? Ans. The word micro has been taken trom Greek word ‘Mikros’ which means ‘small’. According Prof. Boulding, ‘Micro economics is the study of particular firm, particular household, individual pric: wage. income, industry and particular commodity’. Q. 17. Give the Importance of Micro Economics. ‘Ans. The importance of micro economics holds as operation of the economy, economic polices economic welfare and managerial decision. Q, 18, Give the scope of micro economics. Ans. The scope of micro economies can be assessed trom the point of view of theory of demant production factor pricing, optimum allocation of resources and wellare af the society. Q. 19, Point out the limitations of Micro Economics. Ans, The limitations of micro economics are the followings : it fails to provide the complete picture! the economy, not very useful in the formation of policies, unrealist mpi smploymant mn 5 tic asst yment, useful to understand complex problem and lack of predictions. alas Q. 20. Define Macto Economics. Ans. The word macro has heen taken from Greek word " ‘ d “Makros’ which means ‘large’. Prof. SheP defined macro economics “which deals with the functioning of the economy as a ee Prot Q. 21. Explain the Importance of Macro Economics, . ‘Ans. The concept of macra economics is useful for understanding of the functioning of the econ! fomerINTRODUCTION AND DEFINITION OF ECONOMICS Changes in general price level, study of national income, helpful in the study of micro, and the study of economic paradoxes. Q. 22. Mention the limitations of Macro Economics. Ans, The main limitations of macro economics are the heterogeneity of aggregates, too much generation, misleading aggregates and difficulty in measurement of aggregates, B. LONG ANSWER QUESTIONS 1. (a) Examine Adam Smith's wealth defintian of economics. (b) Give the shortcomings of Adam Smith’s definition, 2. ‘Economics is the study of mankind engaged in the ordinary business of life’, Discuss the statement. Or Discuss Marshall's welfare definition af economics, Give its main features. 3. Compare the definitions of economics given by Adam Smith and Marshall 4. Compare and contrast the defintions of Marshall and Robbins. 8. ‘Economics Is the Science of Choice or Scarcity.’ Explain. 6. Explain growth-oriented definition given by Prof. Samuelson. Give its merits. 7. Explain (j) Theoretical and (ji) Practical significance of Economics. 8, Explain Economics (a) As science (b) As an art. 9, Explain the terms micro and macro giving their relative scope. 10. Explain the following : (a) Importance of micro economics. (b) Importance of macro economics. 41, Give interdependence of micro and macro economics. 12. Distinguish between micro and macro economics.Human Activities and Sectors of An Economy Chapter Contents Introduction 8 = Types of Human Activities = Business Sectors iw Types of Economic Activities a Primary Sector a Difference Between the Two = Secondary Sector a Review Questions = Tertiary Sector « Difference Between the Three Sectors « Short Answer Questions * Long Answer Questions INTRODUCTION Work is an essential part of human [i ence and technology, human activities have increased substantially. The a ctivities Some activities expansion of sci performed by human being to satisfy their wants are known as Human Acti are undertaken to earn money, While some are taken up to achieve persona TYPES OF HUMAN ACTIVITIES ‘All human beings engage themselves in some activi a farmer works doe field, a worker works in a factory, a professional (doctor, advecale ant) is busy in his profession, example, or chartered account ‘Human activiti 1. Economic ACH depending on wants, many broadly be classified into two categories . t 2. Non-economic Activi _— — 44HUMAN ACTIVITIES AND SECTORS OF AN ECONOMY Ea GRANGER] HUMAN ACTIVITIES Economic Activities Non-Eeonomic Activities (Taken up to eam money) (Taken up to get satistaction) Economic Activities Economie ai «a living: ivities refer to those activities which are tndertaken to earn mone "y or earn For example, a worker working in a factory, a farmer attending to agriculture work, a doctor sttending to pati e All there activities are undertaken to earn a living. e Economic activities are concerned with production of wealth, exchange and consumption of goods and services, which are not available free of cost. Non-Economic Activities Non-economic activities refer to all those activities which are pursued for social, religious, cuitural, psychological or sentimental reasons, » Non-economic activities have no economic motive and are performed for self satisfaction. © These activities are voluntary in nature and are undertaken at the pleasure of the person pursuing them. Basis for Classifying Economic and Non-economic Activities @ If the activities are performed to earn money or a living then these are economic activities. In case the activities are undertaken without the aim of earning money then these are non-economie activities. Same activity can be economic as well as non-economic. For example, a doctor attending to a patient is an economic activity beeause doctor will charge fee for this work but when the same doctor is altending to ailing daughter, this will become a non-economic activity. Similarly, a house wife preparing food at home non-economic activity and same woman preparing food at a restaurant is an ceonomic activily, because this is done for a monetary gain, Economic and Non-Economic Activities Mr. Ganesha is a lecturer at Punjab University, he gets % 57,000 per month as remuneration for his work. ¢ Ms, Sushila is working as a doctor in a hospital. She also atends to patients in the evening at a clinic started by an NGO for the benefit of poor people. She does not charge any fee for this work und does it as a part of social service. =* Mr, Rohit is a Chef at a Restaurant and is paid a salary for his work whi cooks for the members of the family also. » Ms. Suchitra, a school teacher, teaching her son at home, ic . ECONOMIC 1X, at home he 1. Teaching in a University by Mr. Ganesha refers to which type of human activity ? Ans. Economic activity, 2, What type of human activity Ms. Sushila is doing at the hospital ? Ans. Economic activity, since she is getting a salary to eam a li ing. ine run by an NGO and Ans. Non-economic activity, she is doing it as a social service and driving mental satisfaction out of it. 4. What type of human. activity Mr. Rohit is doing at a restaurant ? Ans, Economic Activity, 5. Cooking at hom activity and why? by Mr. Rohit will be covered under what type of human Ans. Non-economic activity, since he is doing it for love and affection of family. 6. What type of human activity Mr, Suchitra is doing and why ? Ans, Non-economic activity, Suchitra is doing it for the welfare and concern for her son. Difference between Economic Activities and Non-Economic Activities Economic Activities Non-Ecenomic Activities 1, Objective 2. Expectation 3, Money Measurement 4, Duration 5, End Resutt 6. Examples LH ‘The main objective is to earn money Expectation is to eam money-or profit These activities are measured in money or money's worth These ate performed regularly during the working life of a person These activities produce goods and services Worker working in a factory, doctor attending to patients or advocate attending the court. ECONOMY The main objective is to get some sort of satisfaction Expectation is to satisfy social, Psychological, emotional needs These activities are not measured in| money ‘These are performed during spare time or leisure, the period is limited. These activities satisty mental or| emational needs A teacher teaching his own son, a lady| cooking for the family, a docter doing| social service, tis a system, which provides all goods and services to people, which satisfy human wants directly of indirectly. —HUMAN ACTIVITIES AND SECTORS OF AN ECONOMY CLASSIFICATION OF BUSINESS SECTORS Business Sectors are classified into two Production Sector (Industry) [Concerned with production af goods and services Production Sector (industry) Celion (refers to those economic acti with production of goods and services. I includes all those activi iz materials are converted into finished goods, The term industry is also used to mean th firms which are producing similar or related goods. For example iron und steel industr, all those manufacturing firms which are producing iron and steel items. Similar! industry will include all the firms producing electronic goods. r = + ¥ Industry or Production Genetics Sector] [Extractive Sector] [ Manufacturing Construction Nurseries, Cattle-| | Mining, Fishing, Sector Sector Breeding, Fish- Agriculture Cation, Steel, Buildings, hatcheries Cement Roads. TYPES OF SECTORS Industries may be divided into three categories A. Primary Seetor B, Secondary Sector C. Teniary Sector A. Primary Sector Primary sector relates to all those activities which are connceted with the extraction, production, processing of natural resources and reproduction of living species. Its organs are agriculture, forestry, mining, fisheries etc, These Sectors (industries) may be classified as 1. Genetic Industry; and 2. Extractive Industry —aeI€SE ECONOMICS-IX 1. Genetie Industry Genetic industry is related mals and plants with the object to the re-producing and multiplying of certain species of ani- of earning profits from their sale. i farms, d under genetic industry. \-hatcheries, poultry farms, are all covere ge = ae oe eared and then sold on profit. No doubt nature, part in these industries, but human skill is also Important, Nurseries, cattle-breeding, ‘The plants are grown and birds and climate and environment play an important 2, Extractive Industry ‘The extractive industry is engaged in raising some form air. water or from beneath the surfare of the earth. ‘These industries are classified into two categories. «In the first category, workers merely collect goods already existing. Mi and bunting are covered in this category. « Inthe second category, the goods are to be produced by the application of human skill, ie, agriculture and forestry. Extractive industries, supply basic raw materials that are mostly the products of the soil. Products of these industries are usually transformed into many useful products by manufacturing industries. of wealth from the soil, climate, ing, fishing B. Secondary Sector Secondary sector is related to the processing of materials which have already been produced by primary sector. For example, the mining of iron ore is a primary sector but manufacturing of steel is a secondary sector, Secondary sector may further be divided into: manufacturing and construction industries. 1. Manufacturing Industries: This industry is engaged in the conversion of raw materials into semi-finished or finished goods. This industry creates form utility in goods by making them suitable for human use. Most of the goods which are used by consumers are produced by manufacturing industries. These industries supply machines, tools and other equipment to other industries too. The products of extractive industry are generally used as raw materials by manufacturing industry. Manufacturing industries produce two types of goods: (i) Consumer goods: These are the goods which are directly consumed by the consumers for mecting day-to-day needs. For example, bead, toothpaste, soap, oil, clothes, etc (ii) Industrial goods: The goods which are produced for manufacturing consumer goods are known ds industrial goods. For example, machinery, equipment, tools are required to manufacture consumer goods, These are industrial goods. Manufacturing industries may further be sub-divided as follows: (i) Analytical Industry: In this industry, a product is analysed and many products 2 received as final products, in the processing of crude oil, we will get kerosene, pett0l. gas and diesel, etc. aNUMAN ACTIVITIES AND SECTORS OF AN ECONOMY 293) In this industry @ product passes through various processes to ‘The finished product of one process becomes the raw material of the receiving process and soon, the final process produces the finished goods. In case of cotton textiles, cotton passes through ginning, weaving and dyeing processes to become cloth, Sugar industry and paper industry are other examples of processing. (iil) Synthetic Industry: In this industry, many raw materials are brought together in manufacturing process to make a final product. In manufacturing cement, rocks, gypsum, Coal, ete, are required. Soap-making, paints are the other examples of synthetic industry. (iv) Assembly Industry: This industry assembles different components to makes new produet, as in the case of television, cycle, car, computer ete. 2, Construction Industry: This industry is engaged in the creation of infrastructure for Smooth devclopment of the economy. Itis concerned with the construction, erection or fabrication of products. These industries are engaged in the construction of buildings, roads, dams, bridges, and als, These industries use the products of other industries such as cement, iron, bricks, wood, etc, Engineering and architectural skills play an important part in construction industry. Engineering construction firms are organised for undertaking operations of construction industry, C. Tertiary or Service Sector Tertiary or service sector deals with all those activities which smoathen the flow of goods and services from the manufacturers/producers to those who use them. Service industry supplements the activities of primary and secondary industries, Service industry is the backbone of all business activities. These acti 1. Transport 2. Banking 3. Insurance 4. Warehousing 5, Advertising, (Details of these will be discussed in coming chapters) ‘include: © Sectors in Terms of Employment and Share in GDP Sectors Employment Share in GDP (%) Primary 63% 17% Secondary 14% 28% Tertiary 23% 55% Sectors of the Indian Econony Sector Basis of Classification Primary Secondary The nature of production process Tertiary Organized Unorganized The nature of employment Public Private On the basis of ownershiyICSE, ECONOMIC Difference between Primary, Secondary and Tertiary Sectors Sl! Primary Sector Secondary Sector Tertiary Sector No. ee 1. |This deals with the] This deals with the use of natural | This deals wilh the efforts of the resources provided by| resources. human beings. nature 2, |This includes agriculture| This includes every type Of) thie includes services in fisheries, forastry,| Industry. commerce, like communication, Aquaculture ete. banking, insurance ete 3. | Products are tangible Products are tangible products | products are intangible 4, |This sector's development! This sector flourished especially | this sector existed since barter started from earliest times. | after industrial revolution. system bul developed recently vory fastly. Project Work (b) Make a list of about 20 activities, (0) Also note the activities in a market. (d) Now make two lists of activities as (i) economic and (i) non-economic. (). Make a list of the persons working in various organisations or private profession or a shop. fa) Go around on a holiday and note the activities those are being done by individuals, (i) Make three different lists and divide those professions in primary, secondary or tertiary sector. Review Questions A. SHORT ANSWER QUESTIONS Q. 4. Detine economy Ans. Economy is a system which provides people all goods and services which in tum, directly or indirectly, satisly human wants, Q. 2. Explain economic activity, Ans. Economic activity refers to the activities of earning and spending money. It is also ealied the sludy of human activities in relation to wealth, . 3. Give types of economic activities. Ans. Economie activities can be divided on the basis of (}) Production (i) Consumption (i) Distribution and (iv) Exchange. Q, 4, What is the purpose of economic activities 7 Ans. As we know economic activity refers to those activilies which are concerned with utlisation, preduction, exchange and wealth. Thus, all eesnomic activities aim at satisfying the human wants. G. 5, Differentiate between economic and non-economic activities. Ans. The differeces between economic and non-economic activities are as follows: (1) Difference in Objectives : The economic and non-economic activities differ in their objectives. I an activity is performed for acquiring wealth, it is called an economic activity. As against it, if the same —_— —HUMAN ACTIVITIES AND SECTORS OF AN ECONOMY activity is performed for entertainment, religion, love, mercy, patriotism, social service, etc., it will be a non- economic activity . (2) Measurement in money terms : Economic activities are those activities which can be measured in terms of money. Contrary to it, non-economic activities are those activities which cannot be measured in terms of money, (8) Legal : Economy activities are the wealth related activities according to the law of the land. Non- economic activities can be both legal and illegal. Q. 6. What are the causes of the emergence of economic uctivitios ? ‘Ans. There até two causes of emergence of economic activities as given below : (1) Unlimited Wants. Man's wants are unlimited. No man can satisfy all his wants fully. Wants of all members of a society cannot be fully satisfied at any given time. (2) Limited er Scarce Means, The goods and services satistying human wants are limited or searce, Thase goods are called scarce as their demand is greater than their supply. For example, milk is a scarce: commodity. It can be used for preparing cheese, ice cream, rasgullah, etc. Generally, people have to undertake economic acitvities on account of unlimited wants and limited means, Q. 7. What are different sectors of an economy ? Ans. (a) Primary Sector (Agriculture, Forestry, Mining ete.) (b) Secondary Sector (Industry) (¢) Tertiary Sector (Services) Q. @. What is Primary sector ? Ans. Primary sector relates to all those activities which are connected with the extraction, production, Processing of natural resources and reproduction of living species. Its organs are agriculture forestry, mining, fisheries etc. @. 4. What Is Secondary sector 7 Ans. Secondary sector is related to the processing of materials which have already been produced by primary sector. For example, the mining of iron ore is a ptimary sector bul manufacturing of steel is a secondary sector. Secondary sector may further be divided into: manufacturing and construction industries. ©. 10, What is Tertiary sector? Ans. Tertiary or service sector deals with all those activities which smoathen the flow of goods and services from the manufacturers/producers to those who use them. Service Industry supplements the activities of primary and secondary industries. Service industry is the backbone of all business activities, These activities include: 1, Transport, 2. Banking, 3. Insurance, 4, Warehousing, 5. Advertising. B. LONG ANSWER QUESTIONS 1. What are different types of human activities? Give two examples of each, 2. What are different sectors of an economy? Explain each of them. 3. Define Primary, Secondary and Tertiary sectors of an economy. What Is the difference between these sectors? Explain Economic activity. Give its main purpose. What do you mean by an Economy ? Paint out economic and non-economic act 6. Explain the following : (1) Economy (2) Economic activities (8) Non-Economic activities 7. Write a vast essay on different sectors of an economy. = we