Unit I

I. Critically examine welfare definition of economics

Adsm Smith’s Wealth defines economics as science of wealth

Features:
 Economics deals with consumption, production, exchange
and distribution of wealth.
 Only material commodities constitute wealth
 Deals with economic development

Criticism

 Too much importance to wealth

 Restricted meaning of wealth
 No mention of man’s welfare

Hence it is unscientific and narrow

II. Critically explain welfare definition of economics
Alfred Marshall’s says economics is a study of man’s action in the
ordinary business of life.

Features
 A study of mankind
 Ordinary business of life
 Study of individual and social action
 Study of material welfare

Merits

 Avoids criticism made against Adam Smith

 Classifies the economic activities
 Clear about the nature of economics
 Clear on the scope of economics

Criticism

 Limited scope of economics

 Restriction of economics to the activities of ordinary man
 Lack of a clear concept of welfare
 Welfare cannot be quantitatively measured
 Classificatory rather than analytical
III. Critically explain scarcity definition of economics
Robbin’s defines economics is the science which studies human
behavior as a relationship between ends and scarce means which
have alternative uses.

Features:
 Unlimited wants or ends
 Limited or scarce means
 Means have alternative uses
 Wants are of different intensity
 Neutral between ends
 Problem of choice

Merits:

 It is scientific
 Clearer on the scope of economics
 Status of positive science
 Pure science
IV. What is capitalism?
 Capitalism is a system of economic organization by private
ownership
 Instruments and materials of production privately owned
 Work done mainly by hired labour
 Use for the private profit of manmade and natural made
capital

Features:

1. Right of private property

2. Freedom of enterprise
3. Profit motive
4. Competition
5. Non interference of government
6. Freedom of choice by the consumer
7. Price system
8. Key role of entrepreneur
9. Risks
10. Economic inequalities
11. Class conflict
V. Explain merits and demerits of capitalism
Merits
1. Automatic working
2. Incentive to hard work
3. Higher rate of capital formation
4. Economic development and prosperity
5. Optimum utilization of resources
6. Reward to the risk
7. Goods for lower prices
8. Rising standard of living
9. Individual freedom
10. Maximization of welfare
Demerits
1. Economic crisis
2. Inequalities of economic and wealth
3. Insufficiency and wastage
4. Unemployment
5. Class conflict
6. Concentration of economic power
7. Exploration of labour
8. Disregard for human welfare
9. International rivalry and conflict
10. Malpractices
VI. What is socialism explain its features?
 Socialism is a economic organization of society in which the
material means of production are owned by the whole
community.
 Operated by organs representative and responsible to the
community
 All member of community are entitled for benefit.

Silent features

 It is an alternative system of capitalism

 Social ownership of production- no private partnership
 Central authority with adequate powers
 Centrally planned economy
 Equitable distribution of income
 Equal opportunities are provide to all
 It is distinguished by social welfare and social security.
 Destination between rich and poor completely
disappeared.
Types of socialism
1. State socialism
2. Guide socialism
3. Syndicalism
4. Fabrian socialism
5. Democratic socialism
6. Totalitarian socialism
7. Utopian socialism
8. Scientific or Marxian socialism
VII. Merits and demerits of socialism
Merits
1. Social justice
2. Economic use of resources
3. Full employment
4. Rapid economic growth.
5. Increase of national product
6. Economic stability
7. Stability of prices
8. Production of goods according to social priority
9. No exploitation
10. No unearned incomes
11. Equal opportunities
12. No wastage of resources

Demerits

1. Concentration of power in the state

2. Loss of personal liberty
3. Lack of incentives
4. Absence of effective competition
5. No rational in pricing system
6. Loss of consumer’s sovereignty
7. Red tapism
8. Inefficient running of business
9. No economic equality
10. Insufficiency of resources

VIII. Explained merits and demerits of mixed economic system

  Mixed economy is a mixture of capitalism and socialism
 Middle path between capitalism and socialism
 Pandit Jawararalal Neharu brought this concept
Merits
1. Capitalist features of private property personal profit and
competition are protected
2. Combination of features of capitalism and socialism
3. Socialism features like substantial public sector economic
planning and welfare of society included

Demerits

1. Difficult to demarcate between public sector and private

sector
2. Public sector controls key and basic industries
3. Public sector works weekly due to late decision and inefficient
management
4. Difficulty in coordinating two sectors