Economy and its processes
Explain the meaning of the term 'economy'.
State the types of goods and services provided by the term 'economy'.
Explain the meaning of production, consumption and investment.
Differentiate between stock investment and fixed investment.
Distinguish between 'Gross' and 'Net' Investment.
Explain the meaning of the term 'saving'.
Explain the interrelationship between various economic processes.
Questions:
What do you mean by an economy?
Distinguish between consumer goods and producer goods with the help of an example.
Distinguish between consumer services and producer services with the help of an example.
Distinguish between a single use producer good and a single use consumer good.
Distinguish between a durable use producer good and a durable use consumer good.
Explain the relationship between production and consumption
Distiguish between gross investment and net investment.
Distinguish between fixed investment and stock investment.
Explain the interrelationship between various economic activities.
What you have learnt :-
An economy is a system through which people earn their living.
An economy provides single use and durable use goods and services to consumers and producers.
The three vital economic processes of an economy are production, consumption and investment.
These are inter-related.
Production is the process of creating goods and services.
Consumption is the use of goods and services for the satisfaction of human wants.
Investment is the difference between production and consumption during a given period of time.
Points to Remember:-
The vital processes of an economy are (1)Production (2)Consumption (3) Investment.
Production is the activity that creates goods and services.
Production includes not only material goods but it includes services as well.
The level of consumption is determined by the level of production in an economy.
Production of goods and services affects not only the level of consumption but it also affects
the productive capacity of an economy.
Consumption is the activity that uses the goods and services to satify human wants.
The addition of new capital goods to the existing stock of capital goods is called investment.
The change in stock of raw material, semi finished goods and finished good is inventory or
stok investment.
The addition to fixed capital goods like machines, factory, building etc is called fixed investment.
The sum of inventory investment and fixed investment is called gross investment.
The wear and tear of fixed capital in use or its accidental damage or its technological obsolescene
due to chnages in the technique or production and due to change in demand of goods it produces
is called consumption of fixed capital or depreciation.
Net investment = Gross investment -depreciation.
Production, consumption and investment are interdependent.
An economy is a system through which people earn their living.
An economy comprises of production units like farms, factories, shops, banks etc in a particular
area which may be a villege, or a town, or a city, or a country or may be the whole world.
An economy provides goods and services to consumers and producers.
Production, consumption and investment is economic activities.
Goods and services which satisfy human wants directly are called consumers goods and services.
Good and services which are used for producing more goods and services are called producer
goods and services.
Durable use goods are those goods which can be used again and gain.
All services are of single use only as they are produced and consumed simultaneously.
The use of a good determines whether it is a producer good or a consumer good.
State the types of goods and services provided by the term 'economy'.
Explain the meaning of production, consumption and investment.
Differentiate between stock investment and fixed investment.
Distinguish between 'Gross' and 'Net' Investment.
Explain the meaning of the term 'saving'.
Explain the interrelationship between various economic processes.
Questions:
What do you mean by an economy?
Distinguish between consumer goods and producer goods with the help of an example.
Distinguish between consumer services and producer services with the help of an example.
Distinguish between a single use producer good and a single use consumer good.
Distinguish between a durable use producer good and a durable use consumer good.
Explain the relationship between production and consumption
Distiguish between gross investment and net investment.
Distinguish between fixed investment and stock investment.
Explain the interrelationship between various economic activities.
What you have learnt :-
An economy is a system through which people earn their living.
An economy provides single use and durable use goods and services to consumers and producers.
The three vital economic processes of an economy are production, consumption and investment.
These are inter-related.
Production is the process of creating goods and services.
Consumption is the use of goods and services for the satisfaction of human wants.
Investment is the difference between production and consumption during a given period of time.
Points to Remember:-
The vital processes of an economy are (1)Production (2)Consumption (3) Investment.
Production is the activity that creates goods and services.
Production includes not only material goods but it includes services as well.
The level of consumption is determined by the level of production in an economy.
Production of goods and services affects not only the level of consumption but it also affects
the productive capacity of an economy.
Consumption is the activity that uses the goods and services to satify human wants.
The addition of new capital goods to the existing stock of capital goods is called investment.
The change in stock of raw material, semi finished goods and finished good is inventory or
stok investment.
The addition to fixed capital goods like machines, factory, building etc is called fixed investment.
The sum of inventory investment and fixed investment is called gross investment.
The wear and tear of fixed capital in use or its accidental damage or its technological obsolescene
due to chnages in the technique or production and due to change in demand of goods it produces
is called consumption of fixed capital or depreciation.
Net investment = Gross investment -depreciation.
Production, consumption and investment are interdependent.
An economy is a system through which people earn their living.
An economy comprises of production units like farms, factories, shops, banks etc in a particular
area which may be a villege, or a town, or a city, or a country or may be the whole world.
An economy provides goods and services to consumers and producers.
Production, consumption and investment is economic activities.
Goods and services which satisfy human wants directly are called consumers goods and services.
Good and services which are used for producing more goods and services are called producer
goods and services.
Durable use goods are those goods which can be used again and gain.
All services are of single use only as they are produced and consumed simultaneously.
The use of a good determines whether it is a producer good or a consumer good.
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