Meaning of Economics
The word Economics is derived
from the Greek Words Oikos and Nomos. ‘Oikos’ means house and ‘Nomos’ means
management. Hence Economics literally refers to ‘Management of a household’.
However, it is not confined to the study of household management alone. The
meaning and the subject matter of Economics has expanded enormously over the period.
The Importance of the Study of
Economics
There is a financial aspect
influencing most of the activities of man. Economics helps us in many ways in
our lives. Every citizen should have knowledge of economics. The points
mentioned below bring out the importance of the study of economics:
Economics helps us to
understand poverty, unemployment, economic inequality and other related
problems that we get to see around us, and to find solutions for those
problems.
When we attempt to satisfy our
unlimited wants through our limited income, problems of choice crop up.
Economics enables us to find solutions in such situations.
When producers want to create
goods and services, they face with questions like what to produce? How to
produce? Whom to produce for? At what price to produce? Knowledge of economics
guides them in such situation.
Economics identifies the reasons for the rise and fall of prices, and the results of such fluctuations. It provides ideas to bring stability in prices. Land, water, forests, minerals and other natural resources are limited in quantity. Economics suggests ways to make use of these limited resources with care and efficiency and passes them on to the next generation.
Economic Activities
Wants are the basis of all
economic activities
Man’s economic activities can
be classified into four different kinds
1. Production Activities:
Production activities are those that produce goods and services. For ex:
Agriculture, Animal Husbandry, Fishing, Mining, Forest Development, different
kinds of industries, Transport, Communication etc.
2. Consumption Activities:
Goods and services are produced for consumption. Man satisfies his wants by
buying goods and services. All these activities are known as consumption
activities.
3. Exchange Activities: The
producers produce goods for the consumers. There is a marketing system to
supply the produced goods to the consumers. In this system, activities of
collection of goods, transportation, selling and buying take place.
4. Distribution Activities:
The income that is earned through the production of goods has distributed to
the various factors of production that have enabled the production. This
process involves activities undertaken to determine the price of the factors of
production. Steps have taken to ensure that the income earned is
distributed among all factors in a just manner.
Man is not engaged only in
economic activities in his daily life, he engages himself in many activities
like social, cultural, political, educational and religious activities too.
Importance of business activities
Business is an important
economic activity mainly concerned with production and distribution of goods
and services to consumers. Business has two main objectives:
Economic objectives: We are
under the impression that earning profit is the main objective of business. But
it is not so, the sole objective of business includes earning reasonable profit
that is sufficient to enable the business to cover the costs and the businessman
to lead a normal comfortable life. Business supplies goods and services to the
consumers and thus creates consumers. It uses the available resources to
produce the goods that are sufficient to consumers. It produces such goods that
are required according to the changes that take place from time to time. It
brings changes in production by adopting new techniques. It also enables the
consumers to know about the changes in products through advertisement.
Social objectives: Business
produces and supplies the goods that are required for the development of a
nation. It provides employment to many and pays them fair wages and salaries
and helps them to improve their standard of living. Business contributes its
share the economic development of a nation by paying rates, taxes and duties.
Business also contributes a fair share for the social welfare of the nation by
starting and running of schools, colleges, hospitals, stadiums and also by
maintaining public gardens etc.
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