Economics - Introduction - Chapter 1 - ( Indian Economy )


Chapter 1 : Introduction

Introduction – Economics : Economics is the social Science that studies the production, distribution and consumption of goods and services. It derives from Greek word “Oikos” (house) and “nomus” (custom/law), means  “Rules of the household
*Adam Smith describe economics as “An enquiry into the Natureand causes of wealth of nations”. It is related to laws of production,exchange, consumption of wealth.
*Jacob Viner describe it by saying “Economics is what Economists do.”
*Marshall says “its a study of mankind in ordinary business of life, it examines the behaviour of individual and social action.

*Prof. Samuelson writes, “Economics is the oldest of the art, the newestof the science - indeed queen of all social sciences”.

Micro has been taken from Greek Word “micros” which means small. It  is a branch of Economics that related to individual. It as the study of particular firm, household, individual price , wage,industry and commodity.
Macro has been taken fom Greek word “macros” which means large. It is a branch of economics that deals with performance , structure and behaviour of a national or regional economy as a whole.
Economy : An economy is the legal and institutional framework where economic activity take place. It is a system by which people set a living. An economy can be classified on basic of three factors. These are –

Accoding to Ownership of an Economy

Capitalist Economy : In this economy resources are generally owned by Public Privately (Private sector) and enjot freedom in production and consumption.
*Role of market to determine the market price and others. (Price Mechanism/market mechanism).
Example : U.S.A

Socialist Economy : Socialistic economy is where resources is totally controlled by the Public (Government) Sector.
*Controled by state and put to under centralized planning.
*It is a Planned Economy.
*Price is determined by the Government Planning only.
Example : China.
Mixed Economy : It is that economy where the resources is parallel controlled by the private and public sector.
*It is a limited capitalistic economy.
*Price is determined by both Price mechanism and government planning.
Example : India.

According to Nature of an Economy

Closed Economy : It is such an economy where international trade(export and import) does not take place. Example : North Korea.

Open Economy : It is such an economy where international trade (Export and import) does take place.Example : Sri Lanka.

Simple Economy : An economy where no application of science  and technology take place. Here price is not considered as medium of exchange.

Complex Economy : Application of science, technology take place, modern developed economic structure. Money is used as medium of exchange.

Planned economy: Planning is an integral part of this economy. It is basically a characteristic of socialistic economy. Economic planning is controlled by central government.

Unplanned Economy : Market forces are the main factors, its basically one kind of capitalistic economy.

Agriculture Economy: In this economy major part of the population of a country is dependent to agriculture sector. This economy is not developed.

According to Growth of an Economy
Developed Economy : It is a type of economy where per capita income and standard of living is very high.

Under Developed Economy : It is a type of economy where per capita income and standard of living is below the optimal level.

Developing Economy : It a type of economy where per capita income and standard of living is rising.

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