Monday, 23 May 2016

Main Divisions and Basic concepts of Economics

There are four main divisions of economics. They are Consumption, Production, Exchange and Distribution. In Modern times, economists add one more division and that is Public finance.
        1.       Consumption
The economic activity by which individuals try to satisfy their needs and wants are called as consumption. The objectives of consumption are to satisfy needs and want whereas the consumer seeks satisfaction or utility.
        2.       Production
The process of changing, by adding value, raw materials into finished goods is called production, in other words, production is a value adding process to the raw materials in order to make final products.i.e the process of employing scare resources to satisfy human needs is known as production.
       3.       Exchange
Goods may be exchanged for goods or for money. If goods are exchanged for goods, we call it barter. Modern economy is a money economy .As goods are exchanged for money.
       4.       Distribution
Wealth is produced by the combination of Land, Labour, Capital and organization, and it is distributed in the form of rent, wages, interest and profits.
       5.       Public Finance
        Public Finance deals with the economics of government .it studies mainly about income and expenditure of government.

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