Economic Problems and Economics System--Part 1[Class 11 Economics]

• Four factors of production - land, labour ,capital and Organisation

• All wants cannot be satisfied at the same time so we have to decide which one is important for us and which can be delayed.

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ECONOMICS PROBLEMS

DEFINITIONS: By and economic system we mean, social and political rules that govern economic activities of a country.

OR

Economic systems are the means by which countries and governments distribute resources and trade goods and services.

PROBLEMS FACED BY ECONOMIC SYSTEM:{These problems are according to Samuelson}.

1. What to produce and how much to produce.

2. How to produce.

3. For whom to produce.

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SIX SOCIAL GOALS

1. EFFICIENCY:Resources are limited, Limited resource have to be used in such a manner so that maximum production can be obtained . Efficient utilisation only possible without reducing the production of one commodity with increase of other commodity.

• PP' is production possibility curve.

• A and B any point on curve

• C is a point taken left to point B.

• If we move from A to B, production of X increase while Y decreases and vice versa

• Moving from C to A production of Y increases and production of X remaining same and vice versa

• But X and Y both increases while moving from C to D.

2.EQUITY:Second social goal is equity, it means equitable distribution of income and wealth by avoiding inequality in the distribution of income and wealth .Income is created by production of commodity to bring equality in distribution of income appropriate distribution is required .

Example: Government can impose tax on rich and tax revenue obtained from them can be distributed among the poor.

3.FREEDOM: In an Economy there are two types of decision makers.

a)Household b)Firms

The members of household supply different factors of production to firm where reproduction take place, they earn income by supplying these factors of production and again this income spent by them to produce goods produce by Firms. Here freedom means to take decision how much factors of production supplied and demanded by household and firms. Freedom of consumer and Enterprise are social goal in economy

4.GROWTH:Economic growth means increase in the productive capacity of economy. When productive capacity increases total income also increases, increase in income and per capita income are the outcome of the economic growth. If per capita income increases standard of people living will improve.Economic growth is possible through increase in supply of factors of production or technological process.

5.SECURITY:There are two types of security:

a)Foreign aggression b)Economy security.

Foreign security depends on strong defence , strong defence depends on strong Economy base.Here economic security means to free the people from the clutches of poverty and unemployment.Economics security means to fulfill the basic necessities of life like -Right to Food ,Right to Employment,Right to Shelter,etc.

6.STABILITY: Ups and down notice in an economy. Such ups and down is known as business cycle or trade cycle. During upswing stage of the trade cycle income and employment increases and during the downswing phase income and employment decreases. Maintaining ups and down in a business is a social goal.

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Economic Problems and Economics System--Part 2[Class 11 Economics]-

https://sp783275.wixsite.com/website-1/single-post/2017/12/24/Economic-Problems-and-Economics-System--Part-2Class-11-Economics

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