tag:blogger.com,1999:blog-12038025765642668622024-03-24T23:09:57.546-07:00EconomicsJeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.comBlogger27125tag:blogger.com,1999:blog-1203802576564266862.post-34780262359680375642010-03-12T20:26:00.000-08:002010-03-12T21:03:24.334-08:00Poverty<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 240px; height: 216px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8PPnzg-GVie2hF6bk7qwstBhW0KDvy0fgz-bx9qZHY2PL0oxs8EHWZDKMcUp4bJ5M_wAIQSgZA72siP2E5fLcx6pbIIzip9esfgzOkqSUV6hLuEoiwx_eBKGfba13nqfMh0cNYR6oa0um/s320/Poverty.jpg" alt="Poverty" id="BLOGGER_PHOTO_ID_5447979102846404754" border="0" /><br /><div style="text-align: justify;font-family:arial;"><span style="font-weight: bold;">Concept of Poverty</span><br /><br />Poverty can be understood in many ways. Simply speaking, poverty is a social phenomenon in which a section of the society is unable to fulfill even its basic necessities of life. The World Bank defines poverty as inability of people to attain a minimum standard of living. In another notion of poverty line, a critical threshold of income, consumption, or more generally access to goods and service is determined and below which individuals are declared to be poor. In recent definitions, poverty is not just a matter of low income; it is also a question of the poor having few economic opportunities, insecurity in the face of financial and other risks, lack of empowerment, lack of capabilities and freedom. Degree of poverty can be observed even in attitude, culture and environment of a society.<br /><br /><span style="font-weight: bold;">Types of Poverty</span><br /><br /><span style="font-weight: bold;">Absolute and Relative Poverty</span><br /><br />Though poverty is a qualitative phenomenon, it can be classified into absolute and relative terms by using indirect tools of statistics. <span style="font-style: italic;">If the people do not have adequate nutrition, housing, and access to basic health and education, they are called absolute poor.</span> It means absolute poor are those who are unable to fulfill their basic needs or they lie under a minimum specified level of income or consumption. As living standards rise and absolute poverty recedes, social concerns focus on those living in what is recognized as poverty relative to a country's average living standards. Thus, relatively poor are those whose income is below the average of others and above the absolute poverty in the line in the society.<br /><br /><ul style="font-weight: bold;"><li>Absolute Poverty</li></ul>The term <span style="font-weight: bold;">'absolute poverty'</span> refers to that the level of poverty which can not be compared between or among the citizens of nations. It is measured independently analyzing the variables of basic needs. It is defined as the situation in which citizens of a nation deprive from basic needs such as food, shelter, clothes, safe drinking water, sanitation, primary health, and basic education, permanent source of income and employment and productive land with them. Supply of these things is most essential for the survival of human beings but under this poverty one cannot fulfill those things as it is required for the subsistence living. People compelled to survive under absolute poverty cannot achieve <span style="font-weight: bold;">2100 calorie</span> intake from their consumption items in a day.<br /><br /><ul><li><span style="font-weight: bold;">Relative Poverty</span></li></ul>The word <span style="font-weight: bold;">'relative'</span> means related or based or compared with some variable or issues. Likewise, relative poverty refers to that state of poverty which is measured or accounted from the comparative study between or among interrelated economic variables. Basically, relative poverty is measure by making comparison in income, expenditure, saving, investment, purchasing power and living standard of the citizens living in a country in a particular unit of time or duration of time. The comparison may take place between person to person, family to family, society to society and even nation to nation.<br /><br /><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com2tag:blogger.com,1999:blog-1203802576564266862.post-24895429854297972002010-02-08T03:24:00.000-08:002010-02-11T03:39:07.967-08:00Characteristics of Developing Countries<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 163px; height: 237px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5M4tCx2PgUWn2AoPpXdw_O4lulF8XPsP5I-T1a6MWAGY96HyiNxDnHIuOuWmBaqzIcuydgwl3__iSFBiHVJGCi3QtiQyzP6eQW3Bf7gEfbZ11GjpUGPVVzmkykc1S9Dke30OX3fH99RYg/s320/Characteristics+of+Developing+Countries.jpg" alt="Characteristics of Developing Countries" id="BLOGGER_PHOTO_ID_5435844473840773890" border="0" /><br /><div style="text-align: justify;font-family:arial;">Developing countries are also called poor countries. <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">Sometimes</span> they are often called underdeveloped economics. According to the UN criteria, countries with less than $400 level of per <span class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">capita</span></span> income countries are designated as low income countries and <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">countries</span> with less than $750 per <span class="blsp-spelling-error" id="SPELLING_ERROR_3"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">capita</span></span> income as called less developed economics. The following are the main characteristics of developing countries:<br /><br /><span style="font-weight: bold;">General Poverty</span><br /><br />Developing <span class="blsp-spelling-corrected" id="SPELLING_ERROR_4">countries</span> are poor. By definition, GDP and Per <span class="blsp-spelling-error" id="SPELLING_ERROR_5"><span class="blsp-spelling-error" id="SPELLING_ERROR_2">Capita</span></span> Income are at low level. General living standard of people in these countries is very slow. Poverty is visibly disturbing every aspect of life. General health services for people is insignificant. The life <span class="blsp-spelling-corrected" id="SPELLING_ERROR_6">expectancy</span> at birth does not exceeds 60 years.<br /><br /><span style="font-weight: bold;">High <span class="blsp-spelling-corrected" id="SPELLING_ERROR_7">Dependence</span> on Agriculture</span><br /><br />Agriculture is the main occupation in developing <span class="blsp-spelling-corrected" id="SPELLING_ERROR_8">countries</span>. More than 70 percent of active labor force is engaged in this primary sector. Population increases and the increased labor stick to agriculture thereby over <span class="blsp-spelling-corrected" id="SPELLING_ERROR_9">burdening</span> the firm size. There is low output per head.<br /><br /><span style="font-weight: bold;">Underutilized Natural Resources</span><br /><br />Most of the developing countries are rich in natural resources. However, their exploration and exploitation is limited. Sometimes, foreign companies control them. Generally, raw products are exported at low prices.<br /><br /><span style="font-weight: bold;">Lack of Industries and Enterprises</span><br /><img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 206px; height: 219px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKC_UOL9sYRR5OsGFgIu4L6APsi-kCaLvZ2sEMCxIeTfSnALA6OkkGh3_3YO35b5-9jK3RvSvEUVOadhMsGY_x1jrk7TPQRovh2b3BtF01AGy0fCRU7HRODyohBGczCwJo-oVU6TAD1Iq-/s320/Characteristics+of+Developing+Countries.JPG" alt="Characteristics of Developing Countries" id="BLOGGER_PHOTO_ID_5436948327887753026" border="0" /><br />The industrial sector in developing countries is at the primary stage of development. Its contribution to GDP is less than 10% employing 2 to 4% of the labor force. Industrial growth is very slow.<br /><br /><span style="font-weight: bold;">Lack of Capital and Technology</span><br /><br />Capital <span class="blsp-spelling-corrected" id="SPELLING_ERROR_10">deficiency</span> is another common problem of developing <span class="blsp-spelling-corrected" id="SPELLING_ERROR_11">countries</span>. Because the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">countries</span> are poor, they save less which results in low capital formation. They possess less investment capital. In addition their existing technology is old and unproductive.<br /><br /><span style="font-weight: bold;">Lack of Basic Infrastructures</span><br /><br />The factors that help for development are called infrastructures. Good road system, highways, telephone, services, big dams and canals, banks and financial services are some examples of the necessary infrastructures.<br /><br /><span style="font-weight: bold;">Vicious Circle of Poverty</span><br /><br />Developing <span class="blsp-spelling-corrected" id="SPELLING_ERROR_13">countries</span> are poor. They have low per <span class="blsp-spelling-error" id="SPELLING_ERROR_14"><span class="blsp-spelling-error" id="SPELLING_ERROR_3">capita</span></span> <span class="blsp-spelling-corrected" id="SPELLING_ERROR_15">income</span>. Low income means less saving, that is less capital and less investment. Low investment leads to less production that means low income. The vicious circle of poverty is complete. It proves that a poor country is poor because it is poor. It is better understood from the following relation:<br /><br />Low Investment-Low Production-Low Capital-Low Investment-Low Production-Low Income<br /><br /><span style="font-weight: bold;">Demographic Characteristics</span><br /><br />There is high growth rate of population in developing countries. It is as high as 3 percent per <span class="blsp-spelling-error" id="SPELLING_ERROR_4">annum</span>. Children under the age of 15 <span class="blsp-spelling-corrected" id="SPELLING_ERROR_5">constitutes</span> a large proportion, generally more than 40 percent of the total population. Together these two age groups from about 45 percent of the population. Because these groups are economically inactive, they have to depend on the family.<br /><br /><br /><span style="font-weight: bold;"><span class="blsp-spelling-error" id="SPELLING_ERROR_6">Socio</span>-cultural <span class="blsp-spelling-corrected" id="SPELLING_ERROR_7">Characteristics</span></span><br /><br />Different kinds of social groups reside in a country. They differ in terms of religion, castes, and creeds, cultures and customs, languages and beliefs, etc. Such social and cultural values have deep impact in the economy of a nation, Developing countries <span class="blsp-spelling-error" id="SPELLING_ERROR_8">barbour</span> may discordant social patterns in their economic life.<br /><br /><span style="font-weight: bold;">Dualistic Economy</span><br /><br />All the sectors of economy have not been developed in developing countries. Employment opportunities or activities exists in urban areas whereas traditional production method is used in rural areas. Employment opportunities are less. Hence, these countries have dualistic economy which results in various problems with formulating economic policies.<br /><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com37tag:blogger.com,1999:blog-1203802576564266862.post-76592524465411265932010-02-07T03:05:00.000-08:002010-02-07T04:08:08.315-08:00Indicators of Economic Development<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 220px; height: 204px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlIaYqW-T78XMmXpWovbrPmA6eL42fBy-4HC3gdPQmWCaTLuxWCmoRw-uQN7Gmhm7HmyEPjPXONZRJKJmTU1tbXlewMxq4Z30gO9m3hUcRlGKST1tBBRCtNVKWCMEsW1ZhxJ1C_4NMOK_1/s320/Indicators+of+Economic+Development.gif" alt="http://www.economydetail.blogspot.com" id="BLOGGER_PHOTO_ID_5435468633775008466" border="0" />Measurement of economic development and express in definite index is very difficult task in economics. So many opinions are found to indicate level of economic development of a nation. However, some common and popular indicators that used to measure development are discussed below:<br /><div style="text-align: justify;font-family:arial;"><br /><span style="font-weight: bold;">Volume of Per Capita Income</span><br /><br />Per Capita Income is first and most important indicators of economic development of a nation. It is commonly used by all nations in the world along with UN while measuring economic position of the nation. The PCI of Least Developed Countries (LDCs) is less than $400. There are 49 countries LDCs across the globe.<br /><br /><span style="font-weight: bold;">Rise in Factor Productivity</span><br /><br />Development means rise in production and productivity of factors of production. Productivity implies increased per unit of production of factors of production land, labor, capital and organization in terms of rent, wages, interest and profit.<br /><br /><span style="font-weight: bold;">Rise in Living Standard </span><br /><br />Another indicator of development is living standard of common people which should go on rising to higher levels. The very objective of development is to provide better life to people. It refers to increase in average consumption level of individual and society.<br /><br /><span style="font-weight: bold;">Physical Quality of Life Index</span><br /><br />Physical Quality of Life Index is a common indicator of development. It is computed from life expectancy at birth, infant mortality rate and literacy rate of a country. If people live longer and are literate, PQLI value will be high. It is measured in scale of 1 to 100.<br /><br /><span style="font-weight: bold;">Human Development Index</span><br /><br />The Human Development Index as an indicator was introduced by UNDP in the World Human Development Report in 1990. Since then, it has been the most popular indicator of development. Its range of measurement is in between 0 to 1.<br /><br /><br /><span style="font-weight: bold;">Poverty Alleviation and Inequality Reduction</span><br /><br />As a nation develops, poverty must be reduced and the gap between the rich and poor must be narrowed down . Poverty limits opportunities of common people to uplift their life. It weakens their income earning capability. Their access to health, education and skill development is most essential to minimize poverty rate.<br /><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com6tag:blogger.com,1999:blog-1203802576564266862.post-61544094950119718372010-02-05T18:42:00.000-08:002010-02-07T04:10:56.403-08:00Economic Growth and Development<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 169px; height: 151px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgn7_xIrEbTxJpAbhb7mQ_ZiZ3PkndICexeYcCnbzLMRv3lMA1uNjteiTOx_Bt2lp6MsyUcK4FUiImMrfdpdQtdgPNyW-vrcVVQappVGAxUs7gdU14YPFf2rZQe0gmjPo4VRoqdCB7vX6Rz/s320/Economic+Growth+and+Development.jpg" alt="Economic Growth and Development" id="BLOGGER_PHOTO_ID_5434958181236163666" border="0" /><br /><div style="text-align: justify;font-family:arial;"><span style="font-weight: bold;">Economic Growth</span><br /><br />An exact definition of economic growth has not been developed yet. However, it is defined as an increase in aggregate output of goods and services in a country during a given period of time.<br /><br />In the words of Kuznet,"Economic growth is a long-term rise in the capacity to supply increasingly diversified economic goods and services to its population.<br /><br /><span style="font-weight: bold;">Economic Development</span><br /><img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 159px; height: 132px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXWXmFRhEhA3gUQybmiThEz1KeuHG9jqdk7YXbUzOkjP7q1_vyvzPMcBXTgh1DGuKqPPe7LsD_zJ_r-4leQyvXJs5rsdG3XHgZ83Y8fM9-f33RG2wVq9DOv3XAfGIgp5DTlhbYPa0DNaq2/s320/Economic+Growth+and+Development1.jpg" alt="" id="BLOGGER_PHOTO_ID_5434959052218450258" border="0" /><br />The concept of economic development changes along with changes in human attitudes, behaviour and activities. The definition given in a special period may not be suitable for another period. Hence, it is a dynamic subject of study. Economic development in the decade of 1950, compared in terms of per capita income. Similarly, in the decade of 1960, it was linked with human resource development.</div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com0tag:blogger.com,1999:blog-1203802576564266862.post-37708846899852066792010-02-05T03:31:00.000-08:002010-02-07T04:18:03.927-08:00Economic Development:Meaning and Indicators<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 181px; height: 233px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi33J_BZh0hUdyDhyZMvfP-j2mITOooC9wkfEjLlK3qGGdap4KCXHh0VlAAsbh0sIuh4v0lTzbcKpiLPohgHaEoYQb4ZQUf6RyMjJqzOrbgXg4UZU2qLMEnsy6bHQPlYoe243aXWGeK8ya-/s320/Economic+Development.jpg" alt="Economic Development:Meaning and Indicators" id="BLOGGER_PHOTO_ID_5434954700418437634" border="0" />Liberty from poverty is the essence of development. A better society with modern amenities where individuals enjoy quantitatively higher life and a dignified nation committed to sustained and advanced standard of living for longer period for a longer segments of the people are the concerned of economic development. <div face="arial" align="justify"> </div> <div style="font-family: arial;" align="justify">According to Adam Smith, "<em style="font-weight: bold;">Development as an inquiry into the nature and causes of wealth of nation and their rise</em><span style="font-weight: bold;">.</span>"<span style="font-weight: bold;"> </span></div> <div style="font-family: arial;" align="justify"> </div> <div style="font-family: arial;" align="justify">Similarly, Karl Marx defined,"<em><span style="font-weight: bold;">Development in terms of fair share of national income for all including workers.</span>"</em></div> <div style="font-family: arial;" align="justify"> </div> <div style="font-family: arial;" align="justify">M.P. Todaro defined, "<em style="font-weight: bold;">Development as in terms of three values<br /></em><ul style="font-weight: bold;"><li><em>Life Sustance<br /></em></li><li>Freedom of Choice;</li><li><div align="justify">Self-Esteem.</div></li></ul></div> <p style="font-weight: bold; font-family: arial;" align="justify">Life Sustance</p><span style="font-family:Arial;">It means that the basic amenities like food, clothing, shelter, health, education, etc. It means availability of basic amenities to everyone.</span> <p style="font-weight: bold; font-family: arial;" align="justify">Freedom of Choice<br /></p><span style="font-family:Arial;"> means freedom from hunger deprivation, destitution. Choice means expansion of capacity to choose different life patterns and way of living. </span> <p style="font-weight: bold; font-family: arial;" align="justify">Self-Esteem</p><span style="font-family:arial;">It means dignity of a person.</span> <p style="font-family: arial;" align="justify">Development means raising level of living standard of the common people, per capita income to be able to choose a better alternatives to live in society. As a policy, it means creating new and better opportunities of employment and reduction inequality. </p> <p style="font-family: arial;" align="justify">Recently, UN defined development as;</p><div style="font-family: arial; font-weight: bold;" align="justify"><ul><li>Equality</li></ul></div><em style="font-family: arial; font-style: italic;">A nation is supposed to be economically developed, if there is</em><span style="font-style: italic;font-family:arial;" >:</span><ol style="font-family: arial;"><li><div align="justify">Equal employment opportunities; </div></li><br /><li><div align="justify">Equal burden of taxation; </div></li><br /><li><div align="justify">Equal credit facility.</div></li></ol> <ul style="font-family:arial;"><li><span style="font-weight: bold;">Sustainability</span><br /></li></ul><p style="font-family: arial;">A nation is supposed to be economically developed, if there is:</p><ol style="font-family: arial;"><li>Long lasting development in financial sector;</li><li>Long lasting development in environment;</li><li>Long lasting development in physical infrastructures.</li></ol><ul style="font-family:arial;"><li><span style="font-weight: bold;">Productivity</span></li></ul><span style="font-family:arial;">A nation is supposed to be economically developed, if there is high amount of factor income of all factors of production.</span> <ul style="font-weight: bold; font-family: arial;"><li>Employment</li></ul><span style="font-family:arial;">A nation is supposed to be economically developed, if there is:</span> <ol style="font-family: arial;"><li>Political freedom;</li><li>Women empowerment;</li><li>Public participation in development;</li><li>Human rights.</li></ol> <p style="font-family: arial;" align="justify"> </p> <p style="font-family: arial;" align="justify"> </p> <p style="font-family: arial;" align="justify"> </p>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com1tag:blogger.com,1999:blog-1203802576564266862.post-1708100761971112822010-02-03T04:26:00.000-08:002010-02-03T04:44:52.196-08:00Definition of the Economics<div style="text-align: justify;"><span style="font-family:arial;">Economics is the branch of social science which deals with production, distribution and consumption of available goods and services and their proper management. So, economics deals with the trade cycle, production, distribution, comsumption of goods and services in a systematic manner. <span style="font-weight: bold;">Adam Smith (1723-1790)</span>, was consider as the "</span><span style="font-style: italic; font-weight: bold;font-family:arial;" >Father of Economics</span><span style="font-family:arial;">". He published his book entitled "</span><span style="font-style: italic; font-weight: bold;font-family:arial;" >The Wealth of Nations</span><span style="font-family:arial;">" in 1776. In this book he also talks about the "invisible hands". After the publication of the book entitled </span><span style="font-style: italic;font-family:arial;" >"<span style="font-weight: bold;">The Wealth of Nations</span>", </span><span style="font-family:arial;">he was become the most famous person and become the leader of classic ecomic period. In which he give the first concept of economics and it's importance to the human beings. In this book he emphasized the social human behaviour and his social activities with rational behaviour. He was the leader of classical economists. Since Smith's book was publishd he was famous for more than a century. It means that, he wasn't critisized till hundred years. Aftrewards, he was criticized in 1890, after another well functioned definition was published. And, starts middle age of the development of economics, which was lasted in 1932, when modern era of economices come into existance.</span><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com2tag:blogger.com,1999:blog-1203802576564266862.post-90999587390369778892010-02-03T04:25:00.000-08:002010-02-04T04:44:55.069-08:00Difficulties in Measuring National Income<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 212px; height: 245px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXL7jwKBMVLtJ40KdvBbrFjQR4Kn_1RTqaQhKG9NBHdyc1pqjBSJ0b_8grRLxkOa34AFyWz7KZWZsw4U8uSOb7Oul1NQK2UVRrXJI_TkJTmDLiwZI8YjfVSCORZ7Wrk_5X5nbEiQYIjByT/s320/Difficulties+in+Measuring+National+Income.jpg" alt="Difficulties in Measuring National Income" id="BLOGGER_PHOTO_ID_5434368092176586802" border="0" /><br /><div style="text-align: justify;font-family:arial;">There are many difficulties in measuring national income of a country accurately. The difficulties involved in national income accounting are both conceptual and statical in nature. Some of these difficulties involved in the measurement of national income are discussed below:<br /><br /><span style="font-weight: bold;">Non Monetary Transactions</span><br /><br />The first problem in National Income accounting relates to the treatment of non-monetary transactions such as the services of housewives to the members of the families. For example, if a man employees a maid servant for household work, payment to her will appear as a positive item in the national income. But, if the man were to marry to the maid servant, she would performing the same job as before but without any extra payments. In this case, the national income will decrease as her services performed remains the same as before.<br /><br /><span style="font-weight: bold;">Problem of Double Counting</span><br /><br />Only final goods and services should be included in the national income accounting. But, it is very difficult to distinguish between final goods and intermediate goods and services. An intermediate goods and service used for final consumption. The difference between final goods and services and intermediate goods and services depends on the use of those goods and services so there are possibilities of double counting.<br /><br /><span style="font-weight: bold;">The Underground Economy</span><br /><br />The underground economy consists of illegal and uncleared transactions where the goods and services are themselves illegal such as drugs, gambling, smuggling, and prostitution. Since, these incomes are not included in the national income, the national income seems to be less than the actual amount as they are not included in the accounting.<br /><br /><span style="font-weight: bold;">Petty Production</span><br /><br />There are large numbers of petty producers and it is difficult to include their production in national income because they do not maintain any account.<br /><br /><span style="font-weight: bold;">Public Services </span><br /><br />Another problem is whether the public services like general administration, police, army services, should be included in national income or not. It is very difficult to evaluate such services.<br /><br /><span style="font-weight: bold;">Transfer Payments </span><br /><br />Individual get pension, unemployment allowance and interest on public loans, but these payments creates difficulty in the measurement of national income. These earnings are a part of individual income and they are also a part of government expenditures.<br /><br /><span style="font-weight: bold;">Capital Gains or Loss</span><br /><br />When the market prices of capital assets change the owners make capital gains or loss such gains or losses are not included in national income.<br /><br /><span style="font-weight: bold;">Price Changes</span><br /><br />National income is the money value of goods and services. Money value depends on market price, which often changes. The problem of changing prices is one of the major problems of national income accounting. Due to price rises the value of national income for particular year appends to increase even when the production is decreasing.<br /><br /><span style="font-weight: bold;">Wages and Salaries paid in Kind </span><br /><br />Additional payments made in kind may not be included in national income. But, the facilities given in kind are calculated as the supplements of wages and salaries on the income side.<br /><br /><span style="font-weight: bold;">Illiteracy and Ignorance</span><br /><br />The main problem is whether to include the income generated within the country or even generated abroad in national income and which method should be used in the measurement of national income.<br /><br />Besides these, the following points are also represents the difficulties in national income accounting:<br /><br /><ul><li>Second hand transactions; </li><li>Environment damages;</li><li>Calculation of depreciation;</li><li>Inadequate and unreliable statistics; etc. </li></ul><br /><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com33tag:blogger.com,1999:blog-1203802576564266862.post-2198170235498878302010-02-02T04:11:00.000-08:002010-02-02T04:28:30.354-08:00Product Approach of NI Accounting<div style="text-align: justify; font-family: arial;">According to this method, national income is measured in the form of total product obtained from each economic sector such as primary, secondary and tertiary sectors. The product approach consists the following:<br /><br /><span style="font-weight: bold;">Primary Sector </span><br /><br />It includes agriculture based productions like fishery, forestry, and other production activities.<br /><br /><span style="font-weight: bold;">Secondary Sector</span><br /><br />It includes manufacturing, electricity, water supply and such other public welfare activities.<br /><br /><span style="font-weight: bold;">Tertiary Sector </span><br /><br />It includes banking, insurance, transport and communication, defense, administration and such other institutions. Thus,<br /><br /><span style="font-weight: bold;">GDI=Total Production of (Primary+Secondary+Tertiary)sector</span><br /><span style="font-weight: bold;">GNP=GDP+NFIA</span><br /><br />In order to solve this problem, we can either of use the following two methods:<br /><br /><span style="font-weight: bold;">Final Product Method</span><br /><br />GNP is the money value of final goods and services produced during a year. So, national income is measured by finding the market value of all final goods and services produced in the economy during a year.<br /><br /><span style="font-weight: bold;">Value Added Method</span><br /><br />In this approach, the value added at different stages of production is calculated and then for estimating national income. According to this approach, national income is the sum total of value added by different producing units of a country in their production process. Thus,<br /><br /><span style="font-weight: bold;">Value Added=Value of Output-Cost of the Goods</span><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com2tag:blogger.com,1999:blog-1203802576564266862.post-41975368630311124492010-02-02T03:53:00.000-08:002010-02-02T04:29:57.271-08:00Income Approach of NI Accounting<div face="arial" style="text-align: justify;">This approach is based on the estimation of income of various factors of production. Income method considers payments made to all productive resources of the country in the form of rent, wage, interest and profit. Thus,<br /><br />GDI = Rent+Wage+Interest+Corporate Profits along with Indirect Taxes and Depreciation<br /><br />GNI = GDI+NFIA<br /><br />NNI = GNI-Depreciation<br /><br />It doesn't includes the followings:<br /><br /></div><ol style="text-align: justify; font-family: arial;"><li>The income earn from the sale of car, house, property, etc. produced in past. </li><li>The income earned from the sale of stocks, bonds.</li><li>Transfer payments from government. </li></ol><div style="text-align: justify; font-family: arial;">The income method consists the following:<br /><br /><span style="font-weight: bold;">Wages and Salaries </span><br /><br />It includes the wages and salaries received by the employees during the year plus certain supplements like provident fund and other labor income.<br /><br /><span style="font-weight: bold;">Rent</span><br /><br />Rent includes the rent of land, factories, and houses from where the production process is carried out to supply goods and services to the consumer.<br /><br /><span style="font-weight: bold;">Interest</span><br /><br />It includes the net interest income received by the people of the country from the investment as a factors of production.<br /><br /><span style="font-weight: bold;">Corporate Profits </span><br /><br />It consists of corporate profits with inventory valuation and capital consumption, adjustments. It is the profits before tax, which consists of dividend, profit, tax and undistributed profits.<br /><br /><span style="font-weight: bold;">Depreciation</span><br /><br />The depreciation made by each firm for the repair and maintenance of capital goods is also included in national income.<br /><br /><span style="font-weight: bold;">Net Indirect Taxes </span><br /><br />The income generated from indirect taxes is also included in national income accounting approach.<br /><br /><br /><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com5tag:blogger.com,1999:blog-1203802576564266862.post-77540382828909188752010-02-02T03:34:00.000-08:002010-02-02T04:32:02.438-08:00Measurement of National Income<div style="text-align: justify;font-family:arial;">There are three ways of calculating income. They are:expenditure, income and product method. Any of these methods can used in calculating national income. But, the choice of a particular method depends on the availability of data. The three approach are:<br /><br /><span style="font-weight: bold;">Expenditure Approach</span><br /><br />Expenditure approach measures national income as the aggregate of all final expenditure made by different agents of the economy during a year.<br /><br />GDP=C+G+I+(X-M), and<br />GNP=C+I+G+(X-M)+NFIA<br /><br />Where,<br />C=Consumption<br />I=Private domestic expenditure<br />G=Government expenditure<br />NFIA=Net Factor Income from Abroad<br />X-M=Exports minus Imports<br /><br />The expenditure account consists of the following four components:<br /><br /><span style="font-weight: bold;">Personal Consumption Expenditure </span><br /><br />It includes the consumption expenditure made by individual consumers for both durable and non-durable goods and services produced in the economy.<br /><br /><span style="font-weight: bold;">Gross Private Domestic Investment</span><br /><br />It includes private investment in capital goods like machinery, plant, equipment, etc. But the expenditure made on the goods and services produced in the past and the financial made in credit instrument are not included.<br /><br /><span style="font-weight: bold;">Government Expenditure </span><br /><br />It includes government expenditure on national defense and social sector. But, transfer payments made by the government on social security are not included in GNP.<br /><br /><span style="font-weight: bold;">Net Exports </span><br /><br />It means the difference between export earnings and import expenses. The imported goods are not produced within the country and cannot be included in national income, but exported goods are included in GNP as they are produced in the country.<br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com5tag:blogger.com,1999:blog-1203802576564266862.post-12496071093789074122010-02-01T03:19:00.000-08:002010-02-02T03:34:45.138-08:00Concepts of National Income<div style="text-align: justify; font-family: arial;font-family:georgia;">There are various concepts of National Income. The main concepts of NI are: GDP, GNP, NNP, NI, PI, DI, and PCI. These different concepts explain about the phenomenon of economic activities of the various sectors of the various sectors of the economy.<br /><br /><span style="font-weight: bold;">Gross Domestic Product (GDP)</span><br /><br />The most important concept of national income is Gross Domestic Product. Gross domestic product is the money value of all final goods and services produced within the domestic territory of a country during a year.<br /><br />Algebraic expression under product method is,<br /><br /><span style="font-weight: bold;">GDP=(P*Q)</span><br /><br />where,<br />GDP=Gross Domestic Product<br />P=Price of goods and service<br />Q=Quantity of goods and service<br />denotes the summation of all values.<br /><br />According to expenditure approach, GDP is the sum of consumption, investment, government expenditure, net foreign exports of a country during a year.<br /><br />Algebraic expression under expenditure approach is,<br /><br /><span style="font-weight: bold;">GDP=C+I+G+(X-M)</span><br /><br />Where,<br />C=Consumption<br />I=Investment<br />G=Government expenditure<br />(X-M)=Export minus import<br /><br />GDP includes the following types of final goods and services. They are:<br /><ol><li>Consumer goods and services.</li><li>Gross private domestic investment in capital goods.</li><li>Government expenditure. </li><li>Exports and imports.</li></ol><span style="font-weight: bold;">Gross National Product (GNP)</span><br /><br />Gross National Product is the total market value of all final goods and services produced annually in a country plus net factor income from abroad. Thus, GNP is the total measure of the flow of goods and services at market value resulting from current production during a year in a country including net factor income from abroad. The GNP can be expressed as the following equation:<br /><br /><span style="font-weight: bold;">GNP=GDP+NFIA (Net Factor Income from Abroad) </span><br />or, GNP=C+I+G+(X-M)+NFIA<br /><br />Hence, GNP includes the following:<br /><br /><ol><li>Consumer goods and services. </li><li>Gross private domestic investment in capital goods. </li><li>Government expenditure. </li><li>Net exports (exports-imports).</li><li>Net factor income from abroad. </li></ol><span style="font-weight: bold;">Net National Product (NNP)</span><br /><br />Net National Product is the market value of all final goods and services after allowing for depreciation. It is also called National Income at market price. When charges for depreciation are deducted from the gross national product, we get it. Thus,<br /><br /><span style="font-weight: bold;">NNP=GNP-Depreciation</span><br />or, NNP=C+I+G+(X-M)+NFIA-Depreciation<br /><br /><span style="font-weight: bold;">National Income (NI)</span><br /><br />National Income is also known as National Income at factor cost. National income at factor cost means the sum of all incomes earned by resources suppliers for their contribution of land, labor, capital and organizational ability which go into the years net production. Hence, the sum of the income received by factors of production in the form of rent, wages, interest and profit is called National Income. Symbolically,<br /><br /><span style="font-weight: bold;">NI=NNP+Subsidies-Interest Taxes</span><br />or,GNP-Depreciation+Subsidies-Indirect Taxes<br />or,NI=C+G+I+(X-M)+NFIA-Depreciation-Indirect Taxes+Subsidies<br /><br /><strong>Personal Income (PI)<br /></strong><br />Personal Income i s the total money income received by individuals and households of a country from all possible sources before direct taxes. Therefore, personal income can be expressed as follows:<br /><br /><strong>PI=NI-Corporate Income Taxes-Undistributed Corporate Profits-Social Security Contribution+Transfer Payments<br /><br />Disposable Income (DI)<br /><br /><span style="font-weight: normal;">The income left after the payment of direct taxes from personal income is called Disposable Income. Disposable income means actual income which can be spent on consumption by individuals and families. Thus, it can be expressed as: </span><br /><br />DI=PI-Direct Taxes<br /><br /><span style="font-weight: normal;">From consumption approach, </span><br /><br />DI=Consumption Expenditure+Savings<br /><br />Per Capita Income (PCI)<br /><br /><span style="font-weight: normal;">Per Capita Income of a country is derived by dividing the national income of the country by the total population of a country. Thus, </span><br /><br />PCI=Total National Income/Total National Population<br /></strong> </div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com72tag:blogger.com,1999:blog-1203802576564266862.post-76288402058925908572010-01-31T04:19:00.000-08:002010-01-31T04:40:40.360-08:00Nationl Income<div align="justify"><span style="font-family:arial;">The money value of the human resources of a country combined with capital acting on its natural resources produced annually various quantities of goods and services is called national income of a country. The total market value of all final goods and services produced in a year is National Income.</span></div><div align="justify"><br /><span style="font-family:arial;">Alternatively, National Income can be defined as:</span></div><div align="justify"><br /><strong><span style="font-family:arial;">NI=Rent+Wage+Interest+Profit.</span></strong></div><div align="justify"><br /><span style="font-family:arial;">United Nations defines national income in the following three ways:</span></div><div align="justify"><br /><strong><span style="font-family:arial;">Net National Product (NNP)</span></strong></div><div align="justify"><br /><span style="font-family:arial;">Net National Product is the aggregate of net value added in all branches of economic activity during a specified period, including net income from abroad.</span></div><div align="justify"><br /><strong><span style="font-family:arial;">Sum of the Distributive Shares (SDS)</span></strong></div><div align="justify"><br /><span style="font-family:arial;">National Income is the aggregate of income accrued to the factors of production in the form of wages, profits, interest and wage, etc. in specific period.</span></div><div align="justify"><br /><strong><span style="font-family:arial;">Net National Expenditure (NNE)</span></strong></div><div align="justify"><br /><span style="font-family:arial;">National Income is the aggregate of expenditure on final consumption of goods and services, plus domestic and foreign investment.</span></div><div align="justify"><br /><span style="font-family:arial;">According to Pigou,<em> "National dividend is that part of the objective income of the community, including of courses income derived from abroad, which can be measured in money."</em></span></div><div align="justify"><br /><span style="font-family:arial;">In the view of modern economists, National Income is the flow of output, income and expenditure. These three flows are always equal per units of time i.e.</span></div><div align="justify"><br /><strong><span style="font-family:arial;">National Output=National Income=National Expenditure</span></strong></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com2tag:blogger.com,1999:blog-1203802576564266862.post-61229810528050880502010-01-31T03:28:00.002-08:002010-01-31T04:22:32.236-08:00Production Possibility Curve (PPC)<div style="text-align: justify;"><span style="font-family:arial;">Production Possibility Curve is a graphical representation of alternative production possibilities facing an economy. A PPC is a graphical illustration of all combination of goods and services that can be produced in a given economy at a given time, if all the available resources in the economy are fully and efficiently employed.</span><br /><br /><span style="font-family:arial;">As the total productive resources of the economy are limited the economy has to choose between different goods. The productive resource can be employed for the production of various alternative goods. It has therefore, to be decided which goods are to be produce more and which ones less.</span><br /><br /><span style="font-weight: bold;font-family:arial;" >Assumptions:</span><br /></div><ol style="font-family: arial; text-align: justify;"><li>Economy is produces two goods. </li><li>Full employment of resources is assumed. </li><li>Time period is given and constant. </li><li>Factors of productions are given and constant. </li><li>Production techniques is given and constant.</li></ol><div style="text-align: justify;"><br /><span style="font-weight: bold;font-family:arial;" >PPC Schedule</span><br /><br /><span style="font-family:arial;">Production possibilities schedule shows the different combination of different goods with the given technology and factors of production. Let us assume that the economy is producing only two commodities: consumer goods and capital goods.</span><br /><br /><span style="font-family:arial;">From the above table, if all the available resources are allocated to produce consumer goods, an economy can produce is 15 units at combination A with the limited resources, increase the capital goods production consumer goods will be sacrificed. Due to the increased opportunity cost of consumer goods an economy increase capital goods production rather than consumer goods. Lastly, if all the available resources are allocated to produce capital goods, an economy can produce 5 units at combination F.</span><br /><br /><span style="font-family:arial;">If we join all these point of production possibilities a graphical representation of production possibility scale comes out in a curve then it is known as production possibility frontier.</span><br /><br /><span style="font-family:arial;">PPC is a curve showing all possible combination of two goods that a country can produce within a specified time period with all its resources fully or efficiently employed. It is always concave to the origin.</span><br /><br /><span style="font-family:arial;">The PPC also called transformation curve because in moving from one point to another on it, one good is 'transformed' into another not physically but by transferring resources from one use to the another. </span><br /><br /><span style="font-weight: bold;font-family:arial;" >Points Inside and Outside PPC</span><br /><br /><span style="font-family:arial;">With the given resources being fully employed and utilized can lie anywhere on the PPC but not inside or outside of it. </span><br /><br /><span style="font-family:arial;">For example, the combined output of two goods purchased can neither at G not at H. This is so because at point G the economy could not be utilizing its resources fully and the output of two goods represented by H given the productive resources would lie beyond the capacity of the economy to produce. </span><br /><br /><span style="font-weight: bold;font-family:arial;" >Outside Shift in PPC</span><br /><br /><span style="font-family:arial;">If the productive resources expand or increase, the PPC will shift outward to the right showing that more of both goods can be produce than before. Technological progress by improving productive efficiency allows the society to produce more of the both goods with a given and fix amount of resources. </span><br /><br /><span style="font-family:arial;">On PPC n'f', the economy can produce more goods than on curve AF. The PPC shift outward with the growth of the economy because of:</span><br /><br /></div><ol style="font-family: arial; text-align: justify;"><li>The increase in the amount of capital.</li><li>The increase in the amount of natural and human resources. </li><li>Progress in technology.</li></ol>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com19tag:blogger.com,1999:blog-1203802576564266862.post-55955419075690744992010-01-27T03:49:00.001-08:002010-01-31T03:10:02.315-08:00Nature of Economics<a style="font-family: arial;" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicqCcofYsn32AWOOVKoPX2lO9JpZCaabjb2o18fmE8wRjBzlQZ66iwvG02DrAGOanVrTkHXzcd-ZKUrRS5sCUQ0_GdmxYG6LmkVwwlTcQSbyWlTZQPuLPR-oQdC8Gk-iGhyphenhyphen0dri8LKmBql/s1600-h/Nature+of+Economics.png"><img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 320px; height: 258px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicqCcofYsn32AWOOVKoPX2lO9JpZCaabjb2o18fmE8wRjBzlQZ66iwvG02DrAGOanVrTkHXzcd-ZKUrRS5sCUQ0_GdmxYG6LmkVwwlTcQSbyWlTZQPuLPR-oQdC8Gk-iGhyphenhyphen0dri8LKmBql/s320/Nature+of+Economics.png" alt="Nature of Economics" id="BLOGGER_PHOTO_ID_5431385814112657026" border="0" /></a><span style="font-weight: bold; font-family: arial;">Origin of Economics</span><br /><br /><span style="font-family: arial;">An ancient times oriental </span><span style="font-family: arial;" class="blsp-spelling-corrected" id="SPELLING_ERROR_0">philosopher</span><span style="font-family: arial;"> </span><span style="font-family: arial;" class="blsp-spelling-error" id="SPELLING_ERROR_1">Kautilya</span> <span style="font-family: arial;" class="blsp-spelling-corrected" id="SPELLING_ERROR_2">regrades</span><span style="font-family: arial;"> economics as a science of state government. The word '</span><span style="font-weight: bold; font-family: arial;">Economics</span><span style="font-family: arial;">' is derived from the Greek word </span><span style="font-weight: bold; font-family: arial;">'<span class="blsp-spelling-error" id="SPELLING_ERROR_3">Oeikonomicus</span></span><span style="font-family: arial;">'. In Greek word '</span><span style="font-family: arial;" class="blsp-spelling-error" id="SPELLING_ERROR_4">Oeiko</span><span style="font-family: arial;">' means 'households' and '</span><span style="font-family: arial;" class="blsp-spelling-error" id="SPELLING_ERROR_5">Nomicus</span><span style="font-family: arial;">' means 'study'. The word </span><span style="font-family: arial;" class="blsp-spelling-error" id="SPELLING_ERROR_6">oeikonomics</span> refers to the science of household management. Occidental Greek <span style="font-family: arial;" class="blsp-spelling-corrected" id="SPELLING_ERROR_7">philosopher</span><span style="font-family: arial;"> </span><span style="font-family: arial;" class="blsp-spelling-corrected" id="SPELLING_ERROR_8">Aristotle</span><span style="font-family: arial;"> divided </span><span style="font-family: arial;" class="blsp-spelling-corrected" id="SPELLING_ERROR_9">economy</span><span style="font-family: arial;"> into two parts:</span><br /><br /><ul style="font-family: arial;"><li><span style="font-weight: bold;">Economy Proper</span></li></ul><ul style="font-family: arial;"><li><span style="font-weight: bold;">Science of Supply</span></li></ul><span style="font-family: arial;">As time passed, economics was developed by several economists with different vision. Generally, the development of economics is divided into:</span><br /><br /><ul style="font-family: arial;"><li>Period (1776-1890)</li><li><span class="blsp-spelling-error" id="SPELLING_ERROR_10">Neo</span>-Classical Period (1890-1932)</li><li>Modern Period (1932-onwards)</li></ul><br /><span style="font-weight: bold; font-family: arial;">Classical Period (1776-1890)</span><br /><br /><span style="font-family: arial;">The famous economists of this period were Adam Smith, T.R. Malthus, J.B. Say, </span><span style="font-family: arial;" class="blsp-spelling-error" id="SPELLING_ERROR_11">Devid</span><span style="font-family: arial;"> Ricardo, etc. These economists are pillar of the classical </span><span style="font-family: arial;" class="blsp-spelling-corrected" id="SPELLING_ERROR_12">economics</span><span style="font-family: arial;">. The study of economics in and around wealth and its significance.</span><br /><br /><span style="font-weight: bold; font-family: arial;" class="blsp-spelling-error" id="SPELLING_ERROR_13">Neo</span><span style="font-weight: bold; font-family: arial;">-Classical Period (1890-1932)</span><br /><br /><span style="font-family: arial;">The famous economists of this period were Alfred Marshall, A.C. </span><span style="font-family: arial;" class="blsp-spelling-error" id="SPELLING_ERROR_14">Pigou</span><span style="font-family: arial;">, Carl Marx, etc. The study of economics as the satisfaction or welfare derived from the consumption of material goods.</span><br /><br /><span style="font-weight: bold; font-family: arial;">Modern Period (1932-onwards)</span><br /><br /><span style="font-family: arial;">The famous economists of this period were </span><span style="font-family: arial;" class="blsp-spelling-corrected" id="SPELLING_ERROR_15">Leonel</span><span style="font-family: arial;"> Robbins, J.M. Keynes, etc. The study of economics for changing the focus of the study are 'wealth and aspect' and 'material welfare' to 'scarcity and choice' and 'human development'.</span>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com2tag:blogger.com,1999:blog-1203802576564266862.post-7107643995819343162010-01-26T03:18:00.000-08:002010-01-28T04:35:57.377-08:00Allocation of Resources in Economics<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 168px; height: 149px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLvsOuQZmeJcksuUzD9VhrmE7MeuoqLhqv57y2c_Lfr6rKRCabTV_w4LNQkwtT88EfoF64aRNxW2CO31qCgM5kg9HqjcMO_cQPbLXuJhqoyk23rE7tfln9GCC1FonxfXmP6VXp8z9qswKj/s320/Allocation+of+Resources+in+Economics.jpg" alt="Allocation of Resources in Economics" id="BLOGGER_PHOTO_ID_5431018493286785650" border="0" />Scientific management of resources in the line of production, distribution, exchange and consumption is called simply allocation of resources. The allocation of resources discussed principle of right sharing of resources among competing sectors. Whatever, the type of economy be it capitalist, socialist of mixed decision has to be made regarding allocation of resources. In a capitalist economy decision about the allocation of resources are made through the free market price mechanism. A capitalist of free market economy uses impersonal forces of demand and supply to decide what quantities and thereby determining the allocation of resources. The producers in a free market economy motivated as they are by profit consideration take decisions regarding what goods are to be produce and in what quantity by taking into account the relative prices of various goods.<br /><div style="text-align: justify;"><br /></div><ul style="text-align: justify;"><li><span style="font-weight: bold;">What to produce?</span></li></ul><div style="text-align: justify;">The first concered is rated with What to produce? How much to produce? Because resources are scarce production of all goods and services needed by a society are beyond its capacity. It is simply not possible for any economy no how develop it might be. So, it has to select a set among various alternatives production must meet the maximum social need. The first priority goes to the basic needs. However, production is guided by profit and profit knows social justice. An economy should follow social efficiency while recollectiong resources. The social norms and values should guide to maximize social satisfaction so allocation is best which satisfies the most. The problem of what to produce and how much to produce depends on the necessity of the citizens of the country.<br /><br /></div><ul style="text-align: justify;"><li><span style="font-weight: bold;">How much to produce?</span></li></ul><div style="text-align: justify;">The second question is concerned with the method of production. In some cases, labor may play a major role. It is called labor intensive technology. In others, capital may play a major role. It is called capital intensive. Labor intensive methods creats more jobs favouring more employment. It helps in mitigating unemployment problem. Capital in<span>tensive production goes for large volume of production. It commends rapid growth rate. The right decision on the current state of the economy.</span><br /><br /></div><ul style="text-align: justify;"><li><span><span style="font-weight: bold;">For whom to produce?</span></span></li></ul><div style="text-align: justify;"><span>Production for masses or production for profit are two major choices that every economy has to decide. Basic needs of common people cannot be ignored. Of course, the priority goes to wage goods production. In the quality is determined by the level of living standard, which is the outcome of the development level of the economy. Therefore, as the development level of goods, higher production of superior goods proceeds towards fetching super profits. This issue is also related with maintaining social justice. Meeting the basic requirements of all segments of population is the main criteria of resources allocation.</span><br /><br /></div><ul style="font-weight: bold; text-align: justify;"><li><span>Promotion of Efficiency in Economy</span></li></ul><div style="text-align: justify;"><span>How to run an economy efficiently is the first concern of resource allocation. Economics efficiency is measured in additional welfare achieved without worsening any result. It means that new reallocation of resource must not only be able to maintain the existing level but also achieving new heights. Alternatively, reallocation may be profitable somewhere but incurring losses elsewhere. The main objective is to increase aggregate profitability of the economy.</span><br /><br /></div><ul style="font-weight: bold; text-align: justify;"><li>Balance in Economy</li></ul><div style="text-align: justify;">Another purpose of resource allocation is the maintainance of balance among different sectors of an economy. The balance between rural and urban sectors, between home consumption and export promotion, between consumer goods and capital goods and regional balance are the healthy signs of an economy. Investment in these different sectors are very important. How much to invest in what sector? This is the major question, which is studied in this topic.<br /><br /><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com4tag:blogger.com,1999:blog-1203802576564266862.post-83610268875009974462010-01-04T04:01:00.000-08:002010-01-24T04:23:37.468-08:00Choice in Economics<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 272px; height: 265px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXBgQKQXbMZR8b2-DXsaytHqzpa_1IPIO8BzHSpOkpDvKW43NYtQeEYeYHNdbe99U5nFlys5RDOG5muMFjP907M0G9IwrRJyYjFsPa40yk3RG2hiygCPtP0MwOLmHhWgYPxLxmsz8XuW7j/s320/economy.jpg" alt="Choice" id="BLOGGER_PHOTO_ID_5426555307169690674" border="0" /><br /><div style="text-align: justify; font-family: arial;">An economy has to decide how to use its scarce resources to attain the maximum possible satisfaction of the member of the society. This is what, we meet our choice. The optimization objective of the economic actors (producer, consumer and government) necessicities making knowledgeable choice in the use of available resources. Choice is in economic activities at both consumption and production level.<br /><br />In economics, we suppose that a decision maker is rational/knowledgeable economic rationality of decision maker implies the following:</div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com0tag:blogger.com,1999:blog-1203802576564266862.post-57748055711365753932010-01-04T03:24:00.000-08:002010-01-24T04:24:32.872-08:00Scarcity in Economics<a href="http://www.blogger.com/post-edit.g?blogID=1203802576564266862&postID=5774805571136575393"></a><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRtWnyRWBEY3ETLgpMe73V4NxOx1X8KO5OhWI2snKeF4e2aJHg6uWNX3jhoTqUrg31A1wYWqi5scA4MWaV7b_Pc-IpgcyjofLIIHMIo1r5nhQsMErdgI5HfRL1y9pPzTxAssu-pcDMfkgl/s1600-h/scarcity.jpeg"><img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 266px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRtWnyRWBEY3ETLgpMe73V4NxOx1X8KO5OhWI2snKeF4e2aJHg6uWNX3jhoTqUrg31A1wYWqi5scA4MWaV7b_Pc-IpgcyjofLIIHMIo1r5nhQsMErdgI5HfRL1y9pPzTxAssu-pcDMfkgl/s320/scarcity.jpeg" alt="Scarcity" id="BLOGGER_PHOTO_ID_5426556147037804594" border="0" /></a><br /><div style="text-align: justify; font-family: arial;">The common meaning of scarcity refers to the unavailability of goods and services in the market of a certain commodity. The conceptual meaning of scarcity in economics is however different. A commodity is scarce because it commands value. It commands price. We have to pay for any goods and services we want to consume. In addition, the resources that we have are also limited. A commodity is scarce, in economic sense not because it is rare or unavailable in market but because the means to have it are limited of resources to satisfy them are always limited. Human wants are unlimited, but between limited resources and unlimited wants and the problem there in. Economic problem arise because the goods we need are scarce. These scarce goods have many uses. Again, these uses are tempting and competing with each other. There is a problem of choice between alternative uses. Therefore, scarcity and choice guide the whole course of economic activities.<br /><br />Scarcity is not just an individual problem. It is a problem of national economy as well. Its dimension charges when it is applied to national economy. In other words, scarcity of resources gives birth to national economic problems.<br /><br />Scarcity brings broad human problems into our notice. There is poverty and human misery because of scarcity of resources. A poor man is poor because the resources accessible to him are scarce. A country is poor because there is scarcity of resources. Scarcity is deeper sense, tells the story of human misery and unhappiness around the earth. To understand and analyze the problem of poverty of a man and a country and to eradicate it, proper understanding of the problem of scarcity is of utmost importance.<br /><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com3tag:blogger.com,1999:blog-1203802576564266862.post-33645299335700033322009-12-28T03:48:00.000-08:002010-01-26T03:46:16.471-08:00Macroeconomics in Economics<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 160px; height: 237px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqFCQQJf3_C03jf5Ic7V7MOat68TlZVYplQIf76Wa_8EG66Y5Kl_A26JcHqkW5qu6L1mX9waaKfL5n1LVKSd6y8DQDKpy-XdTu4tAnFGbMGeVsOsMZXuSh6bmt1gQRBEa5ZjTFszR5W9O0/s320/Macroeconomics+in+Economics.jpg" alt="Macroeconomics in Economics" id="BLOGGER_PHOTO_ID_5431012877529844946" border="0" /><br /><div style="text-align: justify;font-family:arial;">The macroeconimics conists of two words 'macro' and 'economics'. The word 'macro' is derived from the Greek word 'macro' meaning 'large; and therefore macroeconomics analysis the behaviour of the large aggregate such as total employment, national income and genral price level of the economy. Therefore, macroeconomics is also known as aggregated economics. Prof. K.E. Boulding says,"Macroeconomics deals not with individual quantity, aggregates of these quantities; not with individual incomes as such but with the national income; not with individual prices but with national output."<br /><br />Macroeconomics, in general sense is <span style="font-weight: bold;">Policy Science</span>. On the round, it is more normative than positive. On the aggregared demand side its major tools are fiscal policy is exercised by the government in terms of taxes, transfer and expenditure policies. The central basic in terms of money supplu, interst rate and credit policies conduct monetary policy. These macroeconomics tools are used to solve the present day economic problems such as unemployment, inflation, business cycles and balance of payment disequilibrium.<br /><br />The history of the present day macroeconomics started with the publication of J.M. Keynes "The general Theory of Employment, Interest and Money" in 1936. Before the pulication of Keynes,"General Theory" there was no implict macroeconomics.<br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com1tag:blogger.com,1999:blog-1203802576564266862.post-76845478875563897882009-12-24T04:01:00.000-08:002010-01-26T04:38:35.547-08:00Microeconomics in Economics<div style="text-align: justify;"><img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 234px; height: 182px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBSJyfyZbvzHoGipesoRMwYctprtOGlf47U9tWV5lfFAV920YPyHU5dMhw13R0NSGpA_ygrvGlx_FtJBKgFKUhEHj2uQYD03XY0nRzAzmCaBg0quZAtOHHOHyuBiEFB6jXFkUDjkZicCaH/s320/Microeconomics+in+Economics.jpg" alt="Microeconomics in Economics" /><span style="font-family:arial;">The word 'microeconomics' consists of two words 'micro' and 'economics'. The word 'micro' is derived from the Greek word 'mikros', meaning 'small'. Thus, microeconomics deals with the analysis of small individual units of an economy such as economic activities of individual consumers, firms and small aggregates or groups of individual unit such as various industries and markets.The fundametal issues of microeconomics are based on individual level of income, expenditure, price, production, consumption, wage, rent, interest, profit and so on. Since, these issues are directly or indirectly related to prices of goods and services; microeconomics is often known as </span><span style="font-weight: bold;font-family:arial;" >Price Theory</span><span style="font-family:arial;"> in economics. According to K.E. Boulding,"Microeconomics is the study of particular firms, particular households, individual prices, wages, incomes, individual industries, particular commodities."</span> </div><div face="courier new" style="font-family: arial; text-align: justify;">In other words, in microeconomics we make a microscopic study of the economy. But, it should be remembered that microeconomics doesn't study the economy in its totality. Thus, microeconimics of looking at the economy through a microscope, as it were to see low millions of cells in the economy, the individual as customers and firms producers are functioning in the whole economic organization. Microeconomic theory and seeks to determine the mechanism by which the different economics units attain the position of equilibrium proceeding from the individual units too narrowly defined group.
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<br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com3tag:blogger.com,1999:blog-1203802576564266862.post-23745830335608544942009-12-24T03:28:00.000-08:002010-01-26T04:51:22.657-08:00Normative Economics<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 232px; height: 200px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsjbQt27X18m7nTlrrSfhnQM5GYOFxPNReICe_NSv4r8mf3W4XLNG2nYN_34zPMh_L4lz7jA2f1y2Qu1imKTuPng6GFEs50Is3j_wb6ENCt0efN12XhNWqZ1zMOdMcGRtUiMIFmS1JZrii/s320/Normative+Economics.jpg" alt="Normative Economics" id="BLOGGER_PHOTO_ID_5431029525683182674" border="0" /><br /><div style="text-align: justify;font-family:arial;">Normative economics is an approach to economics that anises outcomes of economic behaviour, evaluates them as good or bad. In other words, normative economics is the branch of economics that incorporates value judgements about what the economy should be like or what particular policy actions should be recomended to achieve a desirable goal. Normative economics looks at the desirability of certain aspects of the economy. It undertakes expressions of support for particular economics of support for particular economic policies. Normative statements are subjective based on opinion only often without a basis in fact or theory. They are value laden, emotional statements that focus on "what economics to<br /><br /><span style="font-weight: bold;">Examples:</span><br /><span style="font-weight: bold;"></span></div><ul style="font-family: arial; text-align: justify;"><li>The decision to grant independence for the central bank is unwise and should be reversed.</li><li>A national minimum wage is totally undesirable as it does not help poor and causes higher unemployment and inflation.<br /></li><li>The agriculture sector should be developed to alliviate poverty.</li><li>Protectionism is the only proper way to improve the living standard of workers whose jobs are threntened by cheap imports.<br /></li></ul>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com1tag:blogger.com,1999:blog-1203802576564266862.post-64575646907092316342009-12-24T03:13:00.000-08:002010-01-27T03:08:30.919-08:00Positive Economics<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 267px; height: 227px; font-family: arial;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhoSJiD82y624FeFgzGCDe92S8sFFA5kdXuC-n14fNnXIceZRyngYdWJhlP7By18IU72huvuuYb52mDjOuyyry6txO_xG_skmpbZhggcb7yfm1BXrBGwVPd4RaCIfexCdMC4oGD7eQIA1I5/s320/Positive+Economics.JPG" alt="Positive Economics" id="BLOGGER_PHOTO_ID_5431031270061207346" border="0" /><br /><div style="text-align: justify; font-family: arial;">Positive economics is an approach to economics that seeks to understand behaviour and the operation of systems without making judgements. Positive economics is sometime known as '<img src="file:///C:/DOCUME%7E1/pragya/LOCALS%7E1/Temp/moz-screenshot.jpg" alt="" />value free economics'. It describes what exists and how it works. Positive economics is a social science and as such is subject to the same checks on the basis of evidence as any science. Positive statements are objective statements dealing with matters of fact or they question about how things actually are. Positive statements are made without obhivious value judgements and emotions. They may suggest an economy relationship that can be tested by resources to the available evidence. Positive economics can be described as "what is, what was and what probably will be" economics. Statements are based on economic theory rather than raw emotion. Often these statements will be expressed in the form of a hypothesis that can be analyzed and evaluated. The concept of positive economics is broadely classified under two aspect.<br /></div><ul style="text-align: justify;font-family:courier new;"><li><span style="font-weight: bold;">Positive Microeconomics: </span><span style="font-family:arial;">It analysis the issues of individual price, income, expenditure, savings, investment, rent, wages, profit in a positive way.</span></li><li style="font-family:arial;"><span style="font-weight: bold;">Positive Macroeconomics: </span>It analysis the issues of aggregate income, savings, investments and output in a positive way. </li></ul>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com0tag:blogger.com,1999:blog-1203802576564266862.post-61708880200498382272009-12-24T02:52:00.000-08:002009-12-24T03:11:51.615-08:00Superiority of the Definition of Economics by Robbins<div style="font-family: courier new; text-align: justify;">RObbin's definition of economics as the science of scarcity and choice is regarded as the superior over Marshallian definition of economics on the following grounds:<br /></div><ul style="text-align: justify; font-family: courier new;"><li><span style="font-weight: bold;">Scientific Definition</span></li></ul><div style="font-family: courier new; text-align: justify;">Robbins definition of economics is considered as more scientific and analytical definition than that of Marshall's definition because it is far from classificatory. Marshall's definition is classificatory into material and non-material welfare, economic and non-economic activities.<br /></div><ul style="text-align: justify; font-family: courier new;"><li><span style="font-weight: bold;">Universal Application</span></li></ul><div style="font-family: courier new; text-align: justify;">The concept of scarcity and choice is widely applicable in any form of economy. It is applicable to planned and unplanned economics, capitalist and socialist economics or mixed economics. Therefore, they are of universal application.<br /><ul><li><span style="font-weight: bold;">Science of Choice</span></li></ul>Choice of resources among unlimited needs or desires of civil society as well as government is the basis of Robbins' definition. It guides a government to utilize limited resources to meet infinite needs of the people. Similarly, Robbins' definition guides enterprenuers to achieve maximum profit by utilizing limited capital and human resources in the line of production.<span style="font-weight: bold;"><br /></span><ul><li><span style="font-weight: bold;">Wider Scope</span></li></ul>Robbin's definition of economics has wider scope than that of Marshall. Robbins explained that human wants, wheather material or non-material, come under the study of economics. But, Marshall's definition has clearly limited the scope of economics to material welfare and social life.<br /><br /><span style="font-weight: bold;"><br /></span><br /><span style="font-weight: bold;"><span style="font-weight: bold;"></span></span><br /><span style="font-weight: bold;"></span></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com4tag:blogger.com,1999:blog-1203802576564266862.post-62551315390527919622009-12-17T03:24:00.000-08:002010-01-27T03:37:18.675-08:00Scarcity and Choice Definition in Economics<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 170px; height: 223px; font-family: arial;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUYjuade5NvDdIG354RKoxeG9CR27vkbSEQ1Qqk2MfBkrCXUv94R3P9GioiojYW4C3IpS5SjXojRZz8iGNyAXsrorYPdyka_GTZ9hVbbnlh42zBm16OVZsm2U0Q83wGKEwalFheQNP1wm6/s320/Scarcity+and+Choice+Definition+in+Economics.png" alt="Scarcity and Choice Definition in Economics" id="BLOGGER_PHOTO_ID_5431381907991494834" border="0" /><br /><div style="text-align: justify; font-family: arial;font-family:courier new;">Lionea Robbins (1898-1984), a British citizen and a professor of economics at London School of Economics (1929-1961), is one of the modern economists who gave the most scientific and logical definition of economics. He published his book,"An Essay on the Nature of Significance of Economic Science", 1932. In which, he gives a new definition of economics. On the 20th page of his book, he says,"Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses."<br /><br />Robbins has defined economics as a human science dealing with alternative use or selection of scarce means and ends concernd with human behaviour. This definition is take as an analytical definition, which is supported by modern economists like:Alec Macfic, Eric Roll, etc.<br /><br /><span style="font-weight: bold;">Main Ideas:<br /><br /></span>Robbins definition has been accepted as a standard definition of the scope of economics. It has the following aspects:<br /></div><ul style="font-family: arial; text-align: justify;"><li>Human wants or ends are unlimited.<br /></li><li>Means or resources that are used to meet the unlimited wants, ends are scarce or limited in supply.<br /></li><li>A choice has to be made from among the multiple wants.</li><li>Such scarce resources can be used altenatively.<br /></li></ul><div style="text-align: justify; font-family: arial;font-family:courier new;"><span style="font-weight: bold;">Logical Explaination</span><br />The definition of economics given by L. Robbins can be explained with the following points:<br /></div><ul style="font-family: arial; text-align: justify; font-weight: bold;"><li>Unlimited Ends of Wants:</li></ul><div style="font-family: arial; text-align: justify;">According to Prof. Robbins, human wants are unlimited which can never be fulfilled. Once the first and most important want is fulfilled, new wants crop up or arise in our mind immediately. When we fulfil the second need, new wants are of the third need would come up for notice. Therefore, human wants in its entirely can never be fulfilled during one's lifetime. This human characteristics can be experienced not only by poor people but also by rich people.<br /><br /></div><ul style="font-family: arial; text-align: justify;"><li style="font-weight: bold;">Scarce Means of Resources:</li></ul><div style="font-family: arial; text-align: justify;">Some human wants are possible to be fulfilled with the consumption of different goods or means. Here, the word 'means' refers to natural resources, human resources, capital resources, physical resources, consumer goods, luxuary goods and unit of time and amount of money availabel to mankind. The quantity supplied of these resources is very scarce or limited in comparison to human demand in society. If then there would not arise any economic problem in human society.<br /><br /></div><ul style="font-family: arial; text-align: justify; font-weight: bold;"><li>Alternative Choice</li></ul>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com3tag:blogger.com,1999:blog-1203802576564266862.post-703779042781498342009-12-17T03:05:00.000-08:002010-01-27T03:12:24.335-08:00Welfare Definition of Economics<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 152px; height: 199px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicqqGZUYfWO2UsS_ewzLcmJP8ADQo2VmymfMQfkBpss_6k9AwVOjLYjlRju9ia0sB-bXA7tguKjf0bBKeeHpNZwpS4JW4sXSkNMJDETcFZHS3tvpG1oBFNM8p0ycc7f3UNZxVFd8sNQxYg/s320/Welfare+Definition+of+Economics.jpg" alt="Welfare Definition of Economics" id="BLOGGER_PHOTO_ID_5431375688087850722" border="0" /><br /><div style="text-align: justify; font-family: arial;font-family:courier new;">In 1890 A.D., Alfred Marshall punlished his book entitled,"Principles of Economics". It protected the existance of economics with the help of this book. Marshall showed that human welfare is more important than wealth. According to him, wealth is for man but man is not for wealth. By the definition of Marshall,"Economics is the study of mankind in the ordinary business of life. It inquires how a man earns income and how he uses it. Thus, it is on the one side the study of wealth and on the other, the most important part is the study of mankind."<br /><br />It is a quite clear that, although economics still studies wealth. Wealth is not considered of primary importance. In other words it has been secondary place, the first place being given to man. Thus, economics could no longer to be considered to a science of selfishness of a 'dismal science'. Rather, it required a great social important because the promotion of human welfare become its chief aim.<br /><br /><span style="font-weight: bold;">Main Ideas:</span><br /><ul><li>Economics doesnot regard wealth as the be-all and end-all of economic activities. Wealth is sought only for promotion of human welfare. </li><li>Economics is a social science as it deals with the behaviour of ordinary people in the society.</li><li>Economics deals with human activities related to material welfare. In this way, Marshall laid the foundation of welfare economics.<br /></li></ul><span style="font-weight: bold;">Logical Explaination</span><br /><br />Marshall shifted the focus of economics from wealth to welfare at the end of the 19th century. No doubt, he considered wealth as an important aspect of economic studies. But, he assigned secondary importance to wealth the primary importance to individual and social welfare. His definition of economics as a science of material welfare are explained below:<br /><br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com2tag:blogger.com,1999:blog-1203802576564266862.post-14986931853137806872009-12-15T03:53:00.000-08:002010-01-27T03:14:16.085-08:00Wealth Definition of Economics<img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 256px; height: 292px; font-family: arial;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUX5KyA-a6Gr6ExVsGvSatDhVZVC_LGsatj-YNFUruSWq64qv1PnfkMCMijKjznOXE5xwa-wUXUsAvZ_5gswzcDgWAvF1s2dTnXpE0_JtKqldTRQoD3ERRDCuum1WrZFAF6Hh47GkVKGXi/s320/wealth+definition.gif" alt="wealth definition" id="BLOGGER_PHOTO_ID_5427679026220244946" border="0" /><br /><div style="text-align: justify; font-family: arial;font-family:courier new;">In 1776 A.D., Adam Smith published a book entitled "An Inquiry into the Nature and Causes of Wealth of Nation". In short, this book is also called "Wealth of Nation". The name of book itself defined what economics is and the study area or subject matter of economics that it covers. This is also considered as the Bible of the science of economics. The meaning of wealth as used by A. Smith refers to abundance of money. Smith was among the first to describe how a free, competitive economy can function without central planning or government intervention to allocate resources efficiently. He recognizes that the virtues of the 'invisible hand' that leads the people's private interest of firm and he was popularly suspicious of firms that are sheltered from competition. Since, he recognized the potentially undesirable effects on resources allocation.<br /><br /><span style="font-weight: bold;">Logical Explanation:</span><br /><br /><ul><li><span style="font-weight: bold;">Significance of Wealth:</span></li></ul>A.Smith assumed that wealth is the only important factor in human society. It can fulfill all the desires of human being in society. He also assumed that the entire efforts of human society is found to be directed towards earning more and more wealth.<br /><ul><li><span style="font-weight: bold;">Role of Economic Man:</span></li></ul>Smith claims that economics studies behavior of those human beings who have only one objective. That objective is the earning of more and more wealth at any cost by any means. Human being of such nature in the words of Smith is an "Economic Man".<span style="font-weight: bold;"><br /><br /></span><ul><li><span style="font-weight: bold;">Priority Given in Definition:</span></li></ul>In the definition of economics first priority is given to wealth and the second priority to mankind. He assumes that mankind is for wealth but wealth is not for mankind. He also believed and argued that wealth and only wealth can give higher satisfaction to all mankind. Therefore, wealth is of a primary importance in his definition.<br /><br /><ul><li><span style="font-weight: bold;">Sources of Wealth:</span></li></ul>A. Smith in his definition of economics assumed that, wages earned by active human resources is to be the only one and most important source of income of a nation. He also suggested that the active labors can earn high amount of wages only through the division of labor in production and distribution of goods and services.He conclude that apart from wages, there is nothing else which can be regarded as sources of wealth of a nation.<br /><span style="font-weight: bold;"><br />Criticisms</span><br /><br />The wealth definition of economics given by Adam Smith has been criticized on several grounds. It is strongly criticized by eminent scholars like Carlyle Ruskin, Alfred Marshall, etc. In short, the critics dubbed economics as the "Bread and Butter Science", "the Gospel of Mammon" and " a Dismal Science". The major points of criticisms of wealth definition are discussed below:<br /><br /><ul><li><span style="font-weight: bold;">Narrow Definition</span></li></ul>A.Smith<span style="font-weight: bold;"> </span>considered that economics is the science that deals only with wealth and material goods. Contrary, to this definitions concept the critics pointed out that economics studies not only material goods and wealth but also some non-material such as services of doctor, teacher, lecturer also fulfill the human wants. Therefore, services provided by professional human resources also constitute aspects of wealth. Therefore, services regarded by people should also be regarded as a part of wealth.<span style="font-weight: bold;"><br /><br /></span><ul style="font-weight: bold;"><li>Unnecessary Emphasis on Wealth</li></ul>A. Smith highly emphasized the importance of wealth in economic life rather than human beings. He assigned primary role to wealth and only secondary place to mankind. On the contrary, the critics pointed out that human life cannot be sacrificed for wealth rather wealth should be used for the betterment of mankind.<br /><br /><ul><li><span style="font-weight: bold;">Single Source of Wealth </span><br /></li></ul>In the view of A. Smith, the amount of wages that is earned by employed labors could be the only one source of wealth of nation. The critics of the definition are however of the view that natural resources, human resources, physical resources and capital resources also as sources of wealth. All these resources put together can be utilized to earn maximum wealth by a nation.<br /><br /><ul><li><span style="font-weight: bold;">Assumption of Economic Man is Wrong</span><br /></li></ul>Smith assumed that every human being who wants to earn money by hook or crook is known as economic man. The critics of the definition instead pointed out that almost all human beings also own the qualities of human life such as feelings of love, respect, self-esteem, sympathy, c0-operation, friendship, trust which might provide greater satisfaction rather than wealth in their lives.<br /><br /><span style="font-weight: bold;">Conclusion</span><br /><br />In conclusion, A. Smith considered human wants as unlimited. It is important that these wants be fulfilled and wealth is the only thing that can fulfill human needs or wants.<br />The definition of economics as the 'science of wealth' has been supported by classical economists such as: F.A. Walker, J. B. Say, J.S. Mill and David Ricardo. According to F.A. Walker, "Economics is that body of knowledge which relates to wealth." Similarly, J.B. Say defines,"Economics is that science which treats of wealth."<br />In conclusion, each and every classical economists defines economics in similar view as Adam Smith that economics is the body of knowledge which relates to wealth.<br /></div>Jeevan Thapahttp://www.blogger.com/profile/11585757493268507210noreply@blogger.com45