Some Basic Economic Concepts

Microeconomics deals with the behavior of elements in the economy-such as, the determination of the price of a single product or the behavior of a single consumer or business farm.

Microeconomics is the study of particular firms, particular households, individual prices, wages incomes, individual industries, and particular commodities. — (Boulding)

 

Macroeconomics deals with the behavior of the economy as a whole with respect to output, income, the price level, foreign trade unemployment and other aggregate economic variables.

Micro economics is a concerned with aggregate and at average of the entire economy, such as national income, aggregate output, total employment, total consumption, savings, investment, aggregate demand and supply, general price level etc.

Goods have special meanings in economics. Anything that satisfies a human want is called good. Goods have qualities which are able to meet up human wants. Goods are tangible and material outcome of production. Examples: Food grains, seeds, fertilizers, machineries, book, pen, etc.

 

Free goods: Free goods mean those goods for which men do not pay money and labor to achieve. Viz. sand in the desert field, light, air, water of river and sea etc.

 

Economic Goods: Economic goods mean scarce goods, which are limited in supply. That’s why; we me to pay money and labor for having these goods. Viz., Shirt, Shari, pant, pen, etc.

 

Material Goods: Which goods can be visible and touchable is called material goods.

 

Non-material Goods: Which goods cannot be visible and touchable is called non-material goods. Viz., goodwill of business, services of doctors, nurse, etc.

 

Consumer’s Goods: Consumers goods are those goods that are wed directly for the purpose or satisfaction. Viz., Food, cloth, pen .

 

Capital Goods: Capital goods are those goods that are used directly in the production activities. Raw materials, machineries, etc.

 

Service: A service is an act or performance that one party can oiler to another. Services are intangible, non-material, inseparable and perishable. The services rendered by teachers, doctors, lawyers, labourers, etc. are the example.

 

Wealth: All economic goods are wealth in economics. Wealth consist the four features like (i) Utility (ii) Supply must be limited/Scarce (iii) Transferability (iv) Externality

 

Utility is the capacity or quality of goods, which is able to meet up human wants. So, it means the power of a commodity to satisfy a human want. In this case, goods may be good or bad which are able to satisfy human wants. Sweets, alcohol, etc. Three types of utility as:

 

i)                    Form Utility: By changing the form of a good, greater utility is created. It means that change in the form offers greater utility to the good. Example: Processing of paddy into rice, wheat into flour, coffee seeds into coffee powder, cotton into cloth, etc.

 

ii)                  Place Utility: by transporting commodity from one place to another, the commodity will have di &rent utilities. Such utility is called place utility. Special movement of the goods i.e. moving a good from one place or market to another place or market increases its utility. Mostly the goods are transported from the place of surplus production to the place of scarcity. Example: Cement, fertilizer, etc.

 

iii)                Time Utility: Any time lag between production and consumption of commodities creates time utility. Through storage over time, greater utility is created for the products. Storage helps to create time utility.

 

iv)                Possession Utility: Commodities in the transaction process, change the hands from one person to another person. Commodities in the hands of producers have some utility and by the time they reach consumers through the traders their utility is increased. Such utility due to possession or transfer eel ownership of the commodity is called possession utility. Example: paddy in the hands of producer. i.e., farmer is having less utility compared to that of consumer in the form of rice.