Most basic Concepts of Economy

1. Adam smith is considered as father of Modern Economics. In his book “The nature & causes of wealth of the Nation’s 1776, he has described economics as science of wealth. According to him economy is the study of wealth only and it deals with its production and consumption. Only material goods which are scarce and useful are wealth.

2. Prof. Marshall in his book “Principles of Economics” 1890 gave a definition with more importance to Human welfare. As per his definition, Economics is study of economic activities of social men who live in society. This definition studies the causes affecting material welfare and real men who believes in social welfare and not selfish men, who believes in only economic abstracts.
3. Economic Activity: any activity which results in production of goods, for which someone is prepared to pay a price (directly or indirectly), is economic activity.
4. Goods: any physical object natural or man made which can command a price in the market is a good.
5. Consumer goods: directly used by consumers. Further categorized into consumer durables and consumer non durables.
6. Capital Goods: used for production of another goods. Further categorized in capital durable and capital non durables.
7. Consumer durables: nonperishable goods such as electronics
8. Consumer Non durables: Perishable goods such as fruits
9. Tangible good can be touched and are physical objects.
10. Intangible goods can’t be touched however experienced, services like travel and trasportation come in this category
11. Producers are of three kinds: Primary (produce directly from natural resources e.g. farming, fishing) , Secondary (produce goods from goods (manufacturing) and tertiary producers which provide services (e.g. transportations)
12. Economic system: Broad framework in which economic activities are carried out. It covers :

1. Supplying factor inputs, like land, labor, capital, organization and enterprise, which enable the agents to earn incomes which in turn could be used for purchasing consumable goods;
2. Production Factors: using the factor inputs (raw materials, machines, labor, land, etc.) for producing goods to be supplied to the consumers.
3. Service Factor: Providing intangible and specialized services directly to the people (example, lawyers, teachers, doctors, and porters) or working for the government (example, soldiers, judges, policemen, etc.).
13. Macro-economics relates to issues such as determination of national income, savings, investment, employment at aggregate levels, tax collection, government expenditure, foreign trade, money supply, price level, etc.
14. Role of state in Economy : Regulatory Role, entrepreneurship role, planning role,
15. Before advent of British in India Economics in India was similar to other parts of the world. People chiefly engaged in agriculture. Agriculturists were either landlords or tenants. There was a flourishing industry as well. Till 17th and 18th centuries Europe was a customer of India’s Industry, which produced Textiles- muslins, cottons, silks, marble work, stone carving, metal ware, wood carving, and jewelry.
16. British entered our country first to trade and later to rule. India became a colony
17. Colonialism Economy is an extreme form of dependency which chiefly includes exploitation by the “Ruling” country of the ruled country. The land which is colony has no political independence and the only relationship between a colony and colonial ruler is exploitation of all kinds of resources.
18. Dada Bhai Naoroji was among the first economic analysts of India who did an excellent analysis of Colonial economy and put forward “the theory of economic drain” His book, Poverty and Un-British Rule in India, brought into the limelight the drain of India’s wealth into Britain. He was a Member of Parliament (MP) in the British House of Commons between 1892 and 1895, and the first Asian to be a British MP. He is also credited with the founding of the Indian National Congress, along with A.O. Hume and Dinshaw Edulji Wacha.
19. The basic assumption was that India was made poor and growing poorer due to British imperialism. The problem was manmade and could be removed.
20. The reason was that one way free trade ruined India’s handicrafts industry exposing it to premature, unequal and unfair competition. India , due to the policies of British became an exporter of raw materials and importer of finished goods which drained our resources heavily .
21. At the time of Independence agriculture was the anchor of our economy as it employed 72% of the total work force. Secondary sector contributed 15%. (of the GDP of 1950-51).
22. The contributory share of agriculture in GDP was 55.4% in 1950-51, 52% in 1960-61 and in 2007-08 it was reduced to 17.1%.
23. At present Agriculture and allied sectors contribute 22% of India’s GDP
24. Per Capita Income:
During 2005-2006 per capita income was Rs. 20868, for 2006-07 it was Rs. 22580 and for 2007-08 it was Rs. 24295. This data is based upon 1999-2000 prices.
25. At Current Prices the GDP was Rs. 25956 in 2005-06, Rs. 29524 for 2006-07 and Rs. 33283 for 2007-08.


Latest E-Books


  • Anonymous

    amazing sir i nvr knw this page is also there 4 economics….i love 2 study economics n thanks i cn revise these basic cncepts n the language is so simple n easy…thanks again…cn u plz post d definitions of economics by other economists.

  • Anonymous

    applaudable effort of ur committed GK today Team….

    Thnx a ton….

  • Anonymous

    ur work is really good

  • Anonymous

    thank you so much it is really useful for all type of exam

  • Anonymous

    superb sir really many many praises from my side

  • krishnendu

    thank you sir really a good work.keep it up.

  • shalini

    sir ..
    thank you so much for the above information.
    will u plese post some more basic concepts,releted to banking taxsation etc.

  • Anonymous

    though per capita income rose by 10.5% to touch Rs44345 in financial year 2010. but till then india is on the track of under poverty line, in which many crore people are exempted from getting their minimum requirement

  • gaurav

    very useful

  • Anonymous

    Good work..thanks!