Class 11 economics

Class

An economy is a system that provides people means to work and earn their living.

Ex- Many people work in the raikway station.

Many people work in a factory.

So, a railway station or a factory is also an economy. 

All such factories, railway stations, farms, etc of a country taken as a whole forms the economy of a country.

Important processes of an economy

Production 

Converting tangible and intangible goods into final goods and services.

Knowledge and idea are intangible inputs.

Consumption 

Use of goods and services by households. 

Investment 

An asset or an item acquired with the motive of generation of income at a future date. 

Exchange 

Transfer of ownership-

A wholesaler transfers a pen to a retailer and the retailer transfers it to the consumer.

Types of economy 

Centrally planned economy, Market economy, Mixed economy 

Centrally planned economy

Production activities are undertaken by the government. Government decides which raw material, method of production, machinery, type of goods and services to produce. 

Factors of production are used by government.

Four factors of production are-

Land

Labour 

Capital 

Entrepreneur 

Land in economics refers to all natural resources like wind power, coal, etc as well.

Labour means dping physical or mental work.

Entrepreneur is the one who manages land, labour and capital. 

A centrally planned economy has no private entrepreneurs.

State controls distribution of goods aming the segments of the society. 

The motive is not to earn profit, rather it is to work for the society.

It is also called a controlled economy.

Market economy 

Factors of production and production activities are controlled by the private firms.

The government has minimal rules and regulations. 

Competition among the businesses.

It is also called capitalist or free economy.

Mixed economy 

Capitalist + Socialist 

Both profit motive and social work coexist. 

Public and private coexist. 

Profit motive and social welfare 

Economic problems 

It tries to bridge tge gap between limited resources and unlimited human wants.

But human wants get unlimited only for raja guna. Things get ugly only by tamo guna. So, promoting a satvik life is the best way to manifest happiness. 

Reasons for economic problems 

Unlimited human wants and different people having different priorities. 

Scarcity of resources. Scarcity means less supply and more demand in an economy. 

Alternate use of the same resource- 

The same petrol is used for many purposes. Tge same petrol runs the generator, runs the car, acts as a fuel to provide light, etc.

The same piece of land can be used to build a building or do agriculture or build a hospital.

Problems of an economy are these questions-

What to produce?

How to produce?

For whom to produce?

Ask your karuna, look around after decorating your eyes with prema kajal and you will have the answer.