Economics Principle of Economics and Definition: According to Adam Smith (1776), economics is an inquiry into the nature and causes...
Principle of Economics and Definition:
According to Adam Smith (1776), economics is an inquiry into the nature and causes of the wealth of nation.
According to Alfred Marshall (1922): Economics is the study of mankind in the ordinary business of life
According to Lionel Robbins (1932): Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternate uses.
Types of resources:
Time, technology and information
Here, entrepreneurship comes in as the ability to put together land, labor, and capital.
We wish to have more resources as much as possible. Human wants, desires, and aspirations are limitless. However, we will have to decide on which we need among a bunch of others.
We run into this Problem of Making Choices because:
Want to raise the standard of living
Gather things that are beyond what is needed at present
Multiplicative nature of some wants, like I wanted to buy a Tshirt with my favorite anime character in it, after I bought it, Now to complete the set I want to buy a Tshirt with the print of his entire gang.
Advertisement influences. You see something on television that you didn’t know existed and then all of a sudden you need it.
Economics is majorly divided into two sides:
This deals with microscopic view of individuals, households, firm, producers and others. The further division includes: Developmental, Monetary, Industrial, Econometrics, History of Economic thoughts, Regional Economics, Environmental Economics.
This deals with the working and performance of economy as a whole. The further division includes Public, International, Labor, Economic History, Comparative, Industrial Finance, Managerial Economics.
Types of Market:
A market is a place where economic activities take place. The basic objective of all these economic activities is to sustain livelihood. We must take into account that all these activities are also Inter-related and Inter-dependent, one way or the other.
Before knowing about the market, we will have to grasp the concept of how the economy works.
Simple model of working economy
Suppose there are two entities a. Household and b. Business firms;
They are the one who supply all the factors of production.
They receive the factors of production from the house-hold and convert them into goods.
They consume the good produced by the firms. Also they create more factors of production. This process then goes on and on.
Coming back to the types of market:
FREE ENTERPRISE ECONOMY
Here, the factors of production are privately owned by people. They have the legal right to posses them as well as auire them from others if needed.
The features are:
There is free competition in the market. There is no limiting amount that certain goods have to be sold at a certain price. I can sell a piece of candy for $100 as well as $1 to make profit or to make the sales. To counter that the other might go for $200 as well as $0.5
Freedom of choice in both production and consumption. If I can I can produce any goods that I can, also the buyer can buy any goods they want.
The ultimate goal of this type of market is to excel the private sectors and grow their gains.
There is freedom of occupational choice. If I feel I can make more by doing something new rather than what I am doing at the moment. I can shift to the next occupation and vice versa.
GOVERNMENT CONTROLLED ECONOMY
This type of economy is also known as comand economy or socialist economy.
The factors of production are owned by the society or the state or other public entities.
The major motivation behind such economy is for social welfare. Making sure everyone in the economy receives the alike benefits.
Though, I might know how to make great baseball bat, but everyone in my economy loves basketball, the need for the society is to produce more basketballs rather than baseball bat. So, the freedom of choice for occupation is limted to what the wants and the needs of the society are.
There is no market competition.
Every thing has a good side and a not so good side. However, mixed economy is supposed to carry the good side only of both the free enterprise economy and the socialist economy.
This economy is belives in the cohesion of Public and Private Sectors.
Most of the countries around the world follow mixed economics. With different contries there are different varients of this economy that they follow. It can majorly be divided into:
Mixed Capitalist Economy
This is the type of economy where the private sector works more on basis of free market economy. However, the government is always there as an participating entity.
Examples: US, UK, Germany, France, Japan and others
Mixed Socialist Economy
This inclines more towards the adopted socialist patters of the society. The government is the one that regulates private sectors and private sectors have to go abide to the plan and objective of the government.
Examples: Russia, China and others