Fill in the blanks with suitable words:
Economy refers to the nature of organization of ____________.
Economic Activities
Which simply translates to decision making related to usage of scarce resources?
Fill in the blanks with suitable words:
NITI Ayog was set up in ____________ .
2015
It was set-up to pursue socio-economic development and it replaced Planning commission.
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Free enterprise is a basic feature of ____________ economy.
Capitalist Economic System
it is a supply and demand system. In this kind of economic system, the resources for production are owned by individuals and they are free to use it in their desired manner.
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Good example of capitalist economy is _____________ .
United States of America
It is hard to find a pure capitalist economic system anywhere in the world, they are usually moderated down.
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Co-existence of public and private sectors is seen in ____________.
Mixed Economic System
India is a Mixed Economy, where both public and private sector function together for economic development.
What is an economy?
The word economy is made up of two words Oikos means household and manage. So it is an area of the production, distribution, trade, and consumption of goods and services. The economy is a framework in which economic institution work together for social welfare and economic development.
It must have the following characteristics:
a. it is a system of individual, economic institutes and government, where all these bodies interact
b. It is never stable i.e. always changing
c. Production, consumption, and investments are economic activities
d. Economic activity and type of technology existing in an economy changes with the type of economy
e. Individuals are both producers and consumers
f. There are various regulating bodies to regulate complex economic systems. (RBI, WTO, World Bank etc.)
Mention the features of the capitalist economic system.
Following are the features of a capitalist system:
a. Private property
Individuals are free to own, sell and transfer their property for profit-making purposes.
b. freedom of enterprise
People are free to choose their occupation. Use their resources to produce whatever they wish and sell it in any market for maximum profitability.
c. Consumer’s Sovereignty
Consumers have supreme power and they influence what the producers would produce. Buyers are free to buy whatever they want to satisfy their needs.
d. Profit motivation
Everyone in this system tries to maximize their wealth through owning resources and utilizing them in such a way that maximizes their profits.
e. Competition, Markets, and prices
There is intense competition and the market forces of demand and supply operate to determine prices of goods and services.
f. The absence of government interference
Government interference in the operation of markets and price determination doesn’t exist or is very minimal.
What are the defects of the capitalist system?
Following are the defects of the Capitalist System:
a. Increasing inequality in wealth:
As an economic system characterized by the private ownership of the means of production and distribution, there exists the obvious tendency for the increasing inequality in society.
b. Goods and services that have high utility to the ordinary citizens are in short supply or non-existent:
In a capitalistic economy profit is the motivation behind all productive endeavors. This way, productive scarce resources could be “wasted” on goods and services that serve no basic purposes, while other goods and services that have high utility to the ordinary citizens are in short supply or non-existent.
c. Monopoly;
People who own maximum resources start controlling the markets and prices of goods and services.
d. Wastage of scarce resources as they may not be used efficiently
e. Overproduction of certain commodities, disturbing economic environment
f. Lack of control of the government of employment, Inflation and other factors
What is planning?
Planning refers to making a strategy to perform efficiently in future. Therefore, in an economic sense, it refers to strategizing the use of resources by economic entities in such a manner that they are used in the efficient and effective manner for complete economic and social benefits. For example- we can study about the planning commission of India now it is replaced by NITI Ayog. It was working towards planning for development, utilization of resources, resource distribution etc.
How are economies classified on the basis of the level of development?
On the basis of development World Bank, IMF and other international institutions have classified countries into two groups on the basis of development or GNI (gross national income)
A. Developed economy:
High National income, high literacy rate, high per capita income.
Trained human resources with proper skills and proper civic facilities
Low infant mortality rate and death rate
Developed social, economical and industrial structure with its citizen having a High standard of living.
B. Developing Countries:
They are
Also known as underdeveloped, backward or poor countries.
Per capita income in these countries is low. They have backward agricultural and industrial sectors with low savings, investment and capital formation.
Low standard of living with poor health and high infant mortality, high birth and death rates and poor infrastructure.
How does the government regulate the activities of the private sector in a mixed economy?
They do it by following methods:
a. Rules, Regulations, and Policies that govern the working of private sectors.
b. Having government audit teams and ministry of commerce and industry to look after the working of both public and private entities
c. Imposing various restrictions and providing subsidies and tax benefits are other means
d. Controlling financial systems of the economy provides a stronghold on private enterprises
What is disinvestment?
Disinvestment refers to selling off ownership (Shares) or liquidating an asset of government in public enterprise to private entities. It can also refer to capital expenditure reductions mean reallocation of resources to more productive activities.
Why is India considered a developing economy?
Main reason for classifying India as a developing economy is lower per capita income. India is considered as a Developing Economy because of the following reasons:
a. Lower per capita income.
b. Low literacy rate, standard of living and employment rate.
c. Lack of common civic infrastructure.
d. Low standard of living.
e. Poor sanitation and high death rate.
f. Low savings and capital formation.
g. Poor agricultural and technological development.
List the objectives of planning in India
Following are the objectives:
● Economic Growth
● Attaining Economic Equality and Social Justice
● Achieving Full Employment
● Attaining Economic Self-Reliance,
● Modernisation of Various Sectors
● Redressing Imbalances in the Economy.
Make a list of public sector enterprises of India and understand their problems.
Here are some public sector enterprises in India:
● National Thermal Power Corporation (NTPC)
● Oil and Natural Gas Corporation (ONGC)
● Steel Authority of India Limited (SAIL)
● Bharat Heavy Electricals Limited (BHEL)
● Indian Oil Corporation Limited (IOCL)
● Coal India Limited (CIL)
● Gas Authority of India Limited (GAIL)
Following are the problems faced by them:
a. Competition from private enterprise
b. Obsolete Technology
c. Low profit
d. Low capital availability
e. Bureaucratic obstacles.
f. Red-tapism.
g. Corruption