Principle of agriculture economic GOODS and SERVICES, Lecture notes of Economics

Download Principle of agriculture economic GOODS and SERVICES and more Lecture notes Economics in PDF only on Docsity! 13 GOODS and SERVICES Economics is concerned with the production and distribution of goods and services. Goods: It is defined as anything that satisfies human wants or needs. Characteristic features of goods: 1. They are tangible in nature 2. They are the material outcome of production Example: Foodgrains, Machinery, Seeds, Fertilizers etc., Services would be the performance of any duties or work for another or professional activity. . Characteristic Features of Services: 1. They are intangible 2. Non- Materialistic 3. Inseparable 4. Variable 5. Perishable Example: Services rendered by agricultural labourers, doctors, teachers etc., Classification of Goods The goods are classified based on supply, durability, consumption and transferability. 1) Based on Supply: The goods are categorized as economic goods and free goods based on the supply criteria Free goods are those goods that exist in lenty that can be used as much as we like. They are gifts of nature and used without payment Example: Air, sunshine etc. The economic goods, on the other hand, are scarce and can be had only on payment. They are limited and generally man- made and hence those can be available only on payment. In Economics, we are concerned with economic goods only. Economic goods mean wealth. Thus there would have been no science of economics if all goods had been free goods. The distinction between free goods and economic goods, of course is not permanent, for instance air is a free good but when we receive it under fan it is an economic good. 2) Based on Consumption: The Goods are categorized as Consumer goods and Producer Goods. 14 Consumer goods are those which yield, satisfaction directly. They are used by consumer directly to satisfy the wants Example: food, clothing, etc. These goods are known as the Goods of First order. Producer goods are these goods which help us to produce other goods. They give satisfaction indirectly by producing other goods which will yield final satisfaction. Example: machinery, tools etc. They are also termed goods of the second order. .3) Based on Durability: This classification emphasized on the nature of the goods and their usage. Mono Period Goods are those goods which can be used only once in the production and consumption process. Example: Seeds, Fertilizers,food etc., Poly Period Goods are those which can be used repeatedly during the production and consumption process over several periods. Example:refrigerator machinery, implements etc., 4) Based on Transferability: External Material Transferable good. Example: Land, Buildings etc., External material non-Transferable good. Example: Degree Certificate, PAN Card etc., External non material transferable good. Example: Goodwill of a business External non material Non-transferable good. Example: Friendship,light Internal non material Non-Transferable good. Example: Intelligence Quotient ,ability ,cruelty etc., 17 3. Time utility: Storing the commodity at the times of surplus production and make them available during scarcity creates time utility. Storage aids in creation of time utility by the supply of seasonal products during off season as per the consumers requirements. 4. Possession Utility: The Utility obtained due to possession or transfer of ownership of the commodity is called possession utility. Buying and selling creates possession utility. For Eg:- Agriculture land sold to real estate for plots would increase the utility for the same piece of land. Cardinal and Ordinal Utility Cardinal utility : This is based on the premise that utiIity could be measured and can be aggregated across individuals. It quantitatively measures the preference of an individual towards a certain commodity. Numbers assigned to different goods or services can be compared. A utility of 100 units towards a cup of coffee is twice as desirable as a cup of tea with a utility level of 50 units. The only limitation is its subjectivity. Ordinal utility: this is the ordinal measurement of utility. According to this utility can not be quantified.For Example: If the utility is 100 units towards a cup of coffee and 50 units for a cup of tea, the conclusion drawn is that Coffee is preferred over tea. The ordering is important rather than the magnitude of the numerical values like 100 and 50 in the given instance. This approach faces the limitation of utilities not being compared. 18 Lecture No.7 Value – Definition – Characteristics; Price – Meaning, Wealth – Meaning Attributes of wealth, Types of wealth, Distinction between wealth and welfare. Value and wealth Value The word “Value” in economics conveys value-in-exchange. It does not include free goods which have only value-in-use. In other words, value of a commodity refers to those goods that can be obtained in exchange for itself or purchasing power of a commodity in terms of other commodities and services. Value can be referred to as the capacity of a good to command other things in exchange. Characteristics of Value. 1. It must possess utility 2. It must be scarce and 3. It must be transferable and marketable. Price In Pre historic times, people did not know money and they had a barter system in which goods are exchanged with goods. Therefore, in those days value and price were used synonymously. But now days, goods are exchanged for money. Therefore, Value expressed in monetary terms is Price Wealth In ordinary language, “Wealth” conveys an idea of prosperity and abundance. A man of wealth understood as a rich person. But in Economics Wealth is synonymous with economic goods. In short, Wealth means anything which has value. Definition: It consists of all potentially exchangeable means of satisfying human wants (J.M.Keynes) Characteristics of wealth : 1. It should possess utility 2. It must be scarce 3. It must be transferable 4. It must be external to person Relation between Money and Wealth : Money is a form of wealth .All money is wealth but all wealth is not money 19 Relation between Income and Wealth : Income is different from wealth. Wealth yields income. Therefore, Wealth is a fund whereas income is a fl Types of Wealth : 1. Individual Wealth : It consists of all tangible and intangible possessions of the individuals besides loans due to them. Example: Land, bonds, deposits are tangible possessions while, intangible possessions are copyrights, patents etc., 2. Social Wealth : It is the wealth, which is collectively used by all the people in a nation. Example: Railways, Public Parks, Government colleges etc., 3. Representative Wealth : It is that form of wealth in the form of title deeds 4. National Wealth : It is an aggregate of all individuals wealth and social wealth of the country inclusive of loans due to people and to the nation debts have to be deducted. Example: Rivers, mountains. 5. Cosmopolitan Wealth: It is wealth of the whole word. It is a sum total wealth of all nationals. 6. Negative Wealth : It refers to the exclusive debts owed by the individuals and the nation. Wealth and Welfare compared Wealth Welfare It is the means to an end It is the end itself It is objective It is subjective It includes harmful goods It does not include harmful goods It does not include free goods Free and economic goods lead to welfare