THE STORY OF VILLAGE PALAMPUR

 The Study of Economics was first started in Greece.

 Economy is a system in which people set for living, but Economics is a study about economic activities performed in an
economy.
 Father of Economics – Adams Smith
 Father of Neo-Classical Economics – Alfred Marshal
 Father of Modern Economics – John Menard Keynes
 Different types of Economy:
On the Basis of Nature:
1. Simple Economy – No application of science and technology. Money is not the medium of exchange. Barter system is
an important feature.
2. Complex Economy – Application of science, technology and infrastructure. Money is the medium of exchange.
3. Closed Economy – Neither export nor import takes place in a country.
4. Open Economy – Either export or import or both are take place in a country.
5. Planned Economy – All economic decisions are taken by the government through planning.
6. Unplanned Economy – Economic decisions are privately taken. Government intervention will be minimum. It also
known as Free Economy or Laissez Faire Economy.
7. Agricultural Economy – If the maximum contribution of a country’s national income comes from agricultural sector
or maximum labour force are engaged in agricultural sector.
8. Industrial Economy – If the maximum contribution of a country’s national income comes from industrial sector or
maximum labour force are engaged in industrial sector.
9. Dualistic Economy – Coexistence of traditional sector and modern sector.
On the Basis of Economic Growth:
1. Developed Economy – High level of economic growth (growth in national Income and high standard of living)
2. Developing Economy – The process of development has initiated. Economic growth take place but at a slower rate.
3. Under Developed Economy – Low economic growth and low standard of living.
On the Basis of Resources or Means of Production:
1. Capitalist Economy – Private ownership, self interest, profit maximization are the key features.
2. Socialist Economy – Collective ownership, government ownership are key feature.
3. Mixed Economy – Coexistence of private sector and public sector. Public sector control private sector in some extant.
 ‘Factors of production’ is an economic term that describes the inputs that are used in the production of goods or services
in order to make an economic profit.
 The factors of production include land, labour, capital and Organization.
 Land: naturally occurring goods like water, air, soil, minerals, flora and fauna that are used in the creation of products.
The payment for use and the received income of a land owner is rent.
 Labour: Human effort used in production which also includes technical and marketing expertise. The payment for
someone else's labor and all income received from one's own labor is wages. Labor can also be classified as the physical
and mental contribution of an employee to the production of the good(s).
 Capital: It has many meanings, including the financial capital raised to operate and expand a business. In much of
economics, however, "capital" (without any qualification) means goods that can help produce other goods in the future,
the result of investment. The payment for use of capital is known as Interest.
Capital can be classified into three types –
Fixed Capital: It includes machinery, factories, equipment, new technology, computer software, buildings, computers,
and other goods that are designed to increase the productive potential of the economy for future years.
Working Capital: It includes the stocks of finished and semi-finished goods that will be economically consumed in the
near future or will be made into a finished consumer good in the near future. These are often called inventory. The
phrase "working capital" has also been used to refer to liquid assets (money) needed for immediate expenses linked to
the production process (to pay salaries, invoices, taxes, interests). The amount of this type of capital usually changes
during the production process.
Financial Capital: This is simply the amount of money the initiator of the business has invested in it.
 Organization: The entrepreneur is the individual who takes an idea and attempts to make an economic profit from it by
combining all other factors of production. The entrepreneur also takes on all of the risks and rewards of the business.
Capital is made up of all of the tools and machinery used to produce a good or service.