1

2
Goods and Services
…Anything which has the
capacity to satisfy Human
wants.

3
 Difference between

GOODS SERVICES

The production and The production

consumption of
and consumption
goods has a gap
i.e., goods are of services is a
storable simultaneous
process i.e.,
services are not
storable. 4
 Goods and Services

Free Goods Economic Goods

Consumer Goods Producer Goods

Perishable Goods Durable Goods

5
Consumer Goods
…goods which satisfy the
wants of the consumer
directly

6
Producer Goods
…goods which are used
in further production
process.

7
 Utility

…when a commodity or
service has capacity or
power to satisfy a human
want.

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Types of Utility

 PlaceUtility
 Form Utility
 Time Utility

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 Production
….is creation of utility.

10
 Consumption
…destruction of utility

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PRODUCTION

EXCHANGE

CONSUMPTION

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 Plant
…is a technical unit

13
 Firm
…is an economic unit.

14
 Industry
...group of firms

Sony
Nokia Motorola
Ericson

BenQ Spice Samsung

Industry of Mobile
Handsets
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Industry
Firm

Plant

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 Factors of Production
 Land
 Labour
 Capital
 Organization or Entrepreneur

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 Land
 …anything above and beneath the
earth is considered as land in
economics.
 For example, rivers, mountains,
plains etc are included in the
definition of land.
 The reward for land is “Rent”

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 Labour
 ….all types of mental and physical exertion done
by an individual to earn income.
 Unskilled
 Skilled
 Professional
 Administrator etc
…all are included in the definition of Labour
 The reward for Labour is “Wages and Salaries”

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 Capital
 It is the man-made factor of
production.
 Capital is classified as—
 Money capital: Pure money and Near
Money
 Real Capital: Assets of business. Like
plant, building, machinery etc
 The reward for capital is “Interest”.

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 Entrepreneur
 One who brings all the factors of production
together to produce goods and services.
 One who performs the following functions—
 Initiating
 Organizing
 Directing and supervising
 Control
 Risk-taking
 Innovation

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 Factors of Production

Land Labor Capital Entrepreneur

Theories of
Production
Rent Wages and Interest Profits
Salaries

Theories of 22
 Forms of Business
Organization
 Sole Proprietorship–
“One man business”
 Partnership
 Joint-stock Company
 Public Enterprises
 Cooperative Societies
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 Market
…is a situation where buyers and
sellers come in contact with each
other to purchase and sell
commodities and services at a
particular price, at a point of time.

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 Goods Market

Payment for Goods and Services

Supply of Goods and Services

HOUSEHOLD Real Flow FIRMS

SECTOR

Rent, Wages, Interest, Profits

Land, Labour, Capital, Organisation

Factor Market

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 Direct Taxes GOVERNMENT Direct and indirect
SECTOR

Taxes
Facilities Infrastructure
Infrastructure

& Subsidies
Payment for Goods and Services
Supply of Goods and Services

HOUSEHOLD Savings FINANCIAL Investment

FIRMS
SECTOR SECTOR

Receipts (Exports)
Rent, Wages, Interest, Profits
Land, Labour, Capital, Organization

Remittances
EXTERNAL
Manpower Payment (Imports)
SECTOR 26
 Types of Economy
 Capitalist– US, UK, Canada,
Japan etc
 Socialist– China, Cuba,
Vietnam etc
 Mixed Economy– India,
Poland etc

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