BASIC CONCEPTS

ECONOMIC ACTIVITY

Any activity that involves the use of

scarce resources to satisfy some human

wants is known as economic activity .It

can be classified into three types:

Consumption activity

Production activity

Exchange activity

GOODS

All things that have value and satisfy

human wants are called goods. It is

classified into following types:

Material and Non- material goods

Economic and Non-economic goods

Consumer goods and Producers goods

Intermediate and final goods

Material and Non-material good

Material goods- are tangible i.e. they

can be seen touched and transferred

from one place to another Ex

shoes ,table, machines etc

Non –material goods- are intangible i.e.

they donot possess any shape ,size Ex.

Services of doctors,lawyers, teachers

etc

Economic and Non economic goods

Economic goods- have a price and

their supply is scarce in relation to its

demand . For Ex - land and all

material goods and non- material

goods

Non economic goods- are called free

goods .They are unlimited in supply

and these goods do not have a price.

For ex. Air,water,sunshine etc

Consumer goods and Producers goods

Consumer goods- directly satisfy the human wants For

ex pen milk furniture etc it is subdived into

Perishable consumer goods

Durable consumer goods

Producers goods-are goods which help in the production

of other goods that satisfy the wants of the consumer

directly or indirectly such as machines, plants ,raw

materials it is again divided into

Perishable producer goods

Durable producer goods

Intermediate Goods and Final goods

Intermediate Goods-Goods sold by one firm

to another for further production process

i.e to manufacture final goods is known as

intermediate goods .for example wheat

used by bakery to make cakes

Final goods-goods sold not for further

production but for personal consumption

are called final goods.

UTILITY Want satisfying power of a commodity is

known as utility. Utility is subjective.Types of Utility Form utility Place utility Time utility Service utility Knowledge utility Natural utility

WEALTH AND INCOME Wealth-is the aggregation of all economic

goods and services. It represents the stock

of all economic goods at a given point of

time. However it can vary periodically over

time

Income- is a flow concept and represents

addition to wealth over time . It represents

the aggregate of the economic goods finally

used in the system over a year

MARKET

Market is an institution rather than any

place or location. It refers to a platform

where buyers and sellers come into

contact with each other and exchange

goods and services amongst each other.

It facilitates exchange between buyers

and sellers

EQUILIBRIUM

It is derived from the Latin word

aequilibrium which means equal balance. In

economics equilibrium implies a position of

rest characterized by absence of

change.Scitovsky defines “ A market or an

economy or any other group of persons and

firms is in equilibrium when none of its

member feel impelled to change his

behavior .”