CBSE Class 11 Economics Full Study Material Set 02

UNIT I

INTRODUCTION

Economics: A science which studies the human behavior as a relationship between ends and scare means which have alternative uses.

Three Types of economy:

1. Market/capitalist economy: - In this type of Economy the factors of production are owned and operated by individuals or group of individuals.

2. Main objective of production is self interest or profit maximization.

3. Central problems are solved by price mechanism or market forces of demand & supply. 

2. Planned/centrally planned/ socialistic economy

1. Factors of production are owned and operated by Govt.

2. Main objective of production is social welfare.

3. Central problems are solved by central planning authority.

3 Mixed Economy: -

1. The Economy in which factors of production are owned and operated by both Govt. and private sector

2. Main objective is profit maximization(private sector) and social welfare(Gov. sector)

3. Central problems are solved by central planning authority(in public sector) and price mechanism (in private sector) Scarcity of Resources:-
It implies that availability/supply of resources is less than their requirement/demand.( D > S )

Economic Problem: Main economic problem is how to allocate the scare resources so as to satisfy maximum of our unlimited wants. Economic problem arise mainly because human wants are unlimited and resources are limited and have alternative uses. This creates the problem of choice.   

2 How to produce: - It is the problem of choice of technique of production. There
are two techniques of production.
(a) Labour Intensive Technique: - It is the technique of production when labour is used more than capital.
(b) Capital Intensive Technique: - In this technique capital is used more than Labour.

3 For whom to produce: - It is the problem related to distribution of produced goods among the different group of the society.
It has two aspects:-
1. Personal distribution
2. Functional distribution
Personal distribution:- When the National Income is distributed according to the ownership of the factors of production.
Functional distribution: - When the national Income/Production is distributed among different factors of production like Land, Labour, capital and Entrepreneurship for providing their service in term of rent, wages, interest and profit respectively.

4 Problem related to the efficient use and fuller utilization of resources

Efficiency of production means the maximum possible amounts of goods and services are being produced with available resources. The resources are already scare in relation to the need for them and therefore an economy has to ensure that its resources do not remain underutilized their under employment is nothing but wastage of resources.                        

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