Basic Concepts of

Macroeconomics
The economic wealth or well-being of a nation does not rely upon the meagre ownership or
possession of resources. The point is how these resources are utilised in causing a flow of
manufacturing and as a result, how income and wealth are influenced from that procedure.

What are Final Goods?

In our modern economic position, the flow of manufacturing emerges out of the manufacturing
of goods like commodities and services by millions of small and large firms. These firms range
from giant enterprises (that employ a large number of people) to single entrepreneur firms.

Each manufacturer of goods plans to sell their output. It can range from small articles like
buttons or pins to the bigger ones like helicopters, automobiles, machinery, or any other services
like those of a lawyer, a doctor, or a financial counsellor. Such commodities and services are
manufactured for the customers.

 A customer can be an individual or a firm. The commodities or service bought by that

organisation might either be for the end-user or for the use in further manufacturing.
 When it is utilised in further manufacturing, it often loses its features as that specific
commodity and modifies through a productive procedure into another commodity.
 Hence, a farmer manufacturing wool sells it to a spinning mill where the raw wool
modifies to form yarn. Later, the yarn is sold to a textile mill, where it modifies into cloth
through a productive process. The cloth further modifies into an article of clothing, which
is then ready to be sold to the end-user.
 The article meant for the end-user does not pass through any more phases of
manufacturing or modifications. Thus, it is termed as a final good.

What are Consumer Goods?

Out of the final goods, we can differentiate between consumption goods and capital goods.
Goods such as food and clothing, and services like recreation that are utilised when bought by
their ultimate customers are known as consumption goods or consumer goods.

This concept is about the Basic Concepts of Macroeconomics. To know more about such
concepts, stay tuned to BYJU’S.
Important Topics in Economics:

 Consumer Protection Act

 What is Demand?
 Circular Flow of Income
 Consumer Equilibrium
 Central Problems of an Economy

COMMERCE Related Links

Balance Of Payments Formula Planning Process
Goodwill MCQs Classes Of Shares
Consumer Equilibrium Nominal And Real Gdp
Economic Environment In India Commerce Project Class 11
Balance Sheet MCQs Cash Book Class 11

Comments
Leave a Comment
Your Mobile number and Email id w

Central Problems of an Economy :

Study Material
Central Problems of an Economy
An economic problem generally means the problem of making choices that occurs because of the
scarcity of resources. It arises because people have unlimited desires but the means to satisfy that
desire is limited. Therefore, satisfying all human needs is difficult with limited means.

Causes of Economic Problem

 Scarcity of resources: Resources like labour, land, and capital are insufficient as
compared to the demand. Therefore, the economy cannot provide everything that people
want.
 Unlimited Human Wants: Human beings’ demands and wants are unlimited which
means they will never be satisfied. If a person’s one want is satisfied, they will start
having new desires. People’s wants are unlimited and keep multiplying, therefore, cannot
be satisfied because of limited resources.
  Alternative Uses: Resources being scarce, the same resources are used for different
purposes. and it is therefore essential to make a choice among resources. For instance,
petrol is used in vehicles and is also used for generators, running machines, etc.
Therefore, the economy should now make a choice within the alternative uses.

List of Economic Problems:

(A) What to produce?

 A country cannot produce all goods because it has limited resources.
 It has to make a choice between different goods and services.
 Every economy has to decide what goods and services should be produced.
 Example: If a farmer has a single piece of agricultural land, then he has to make a choice
between two goods, i.e., whether to grow rice or wheat.
 Similarly, our government has to decide where to allocate funds, for the production of
defence goods or consumer goods, and if both, then in what proportion.

(B) How to produce?

 This problem refers to the choice of technique of production. It arises when there is an
availability of more than one way to produce goods and services.
 There are mainly two techniques of production. These are:

 Labour intensive technique(greater use of labour)

 Capital intensive technique(greater use of machines)
 Labour intensive technique promotes employment whereas capital intensive technique
promotes efficiency and growth.

(C) For whom to produce?

 The society cannot satisfy all the wants of all the people. Therefore, it has to decide who
should get how much of the total output of goods and services.
 Society has to make choice of whether luxury goods or normal goods have to be
produced. This distribution or proportion directly relates to the purchasing power of the
economy.

Examples of Economic Problems

CHIT-CHAT TIME
(In this conversation, Raju is asking his mother to cook pizza and French fries for him. But
Mother is in the dilemma that if she prepares pizza for Raju, then how she could make salad for
Raju’s father.)
Raju: I want my reward for this achievement.
Mother: Okay tell me. What do you want?
Raju: I want to eat Pizza and French fries. Please prepare it for me.
Mother: But Raju Vegetables are limited and today market is also closed and I have to prepare
salad for your dad. Either I can prepare 2 Pizzas or Full plate of salad.
Raju: No, I want to eat Pizza and French Fries anyhow.
(Mother is thinking about what to prepare as vegetables are available in limited quantities.)
Mother: Ok I will prepare 1 Pizza and French Fries for you and half plate salad and French Fries
for your dad.
(Mother is chopping potatoes for French fries and vegetables for pizza)
Raju: Mom, How much time you will take to prepare my meal.
Mother: Dear, wait for 20 minutes.
(Mother called Rahul, Your pizza and French fries is ready now)
Raju: Thanks Mom.
Mother: Did u like it? Is it Yummy?
Raju: Yes mom. Pizza is out of the world. But…
Mother: But.. what?
Raju: Fries served in McDonalds are different from ours, I mean shape, size and crispiness of
our fries is not up to the mark.
Mother: Yeah I agree, But McDonald prepare fries with the help of automatic hi-tech machines.
Dear, quality differs when goods made by automatic machines (capital intensive technique) and
when goods are handmade (labour intensive techniques)
(In the above conversation Mom is trying to explain Rahul that there are two types of
production techniques i.e. Capital intensive technique and labour intensive technique)
(Dad sitting on the dinner table and asking Rahul’s mother why she has prepared only half
plate salad)
Father: Sneha, why have you prepared only a half plate salad for dinner today?
Mother: Today, Raju got full marks in Business studies Test.
Father: Oh wow! Great.
Mother: So he demanded to pizza. But Vegetables required to prepare pizza fell short and
market was also closed.
Father: Oh! Then what did you do?
Mother: Then I thought to make fries with pizza and spared some vegetables for salad.
Father: Great job! You are smart wife and also a smart mother. Who knows how to make
optimum utilization and effective allocation of limited resources. I think you are the true
economist in our home.

LETS PRACTICE

1. Which of the following related to the problem of ‘what to produce’?

1. The choice of technique

2. Distribution of income
3. Market value of goods
4. The choice of goods
View answer

Answer: d
2. Which of the following is not the central problem of the economy?

1. What to produce?
2. Where to produce?
3. For whom to produce?
4. None of these
View answer

Answer: b
3. Which of the following is related to the problem ‘How to produce’?

1. Factoral distribution of Income

2. The choice of technique
3. The choice of product
4. None of these
View answer

Answer: b

COMMERCE Related Links

Accountancy Abbreviation Issue Of Debentures As A Collateral Security
Change In Profit Sharing Ratio What Is A Fixed Asset
Census And Sample Survey Business Studies Sample Paper Class 12
Types Of Communication Difference Between Branding And Packaging
Types Of Debentures Karl Pearson Coefficient Of Correlation
Comments

Types of Communication
Every communication across the globe should have a message, at least one sender, and a
recipient. Having excellent communication skill is vital for a healthy and productive workplace.
Frequently classified as an “interpersonal skill” or “soft skill”, communication is a process of
sharing knowledge, data, and information from one individual to another or group of people.

Though it looks simple, communication is generally a very complicated subject and is influenced
by an array of things. This article will help you understand communication in depth.

What is Communication?
Communication is a process that involves sending and receiving of messages through a verbal
and non-verbal method. The sender sends a message, the receiver receives a message and sends
it back with the feedback to the sender again.

The methods of communication involve oral and speech communication, written and graphical
representations. Additionally, it includes the cultural sphere, a tool utilized to communicate,
location, etc. Though it looks simple, communication is generally a very complicated subject.

In other words, communication is a two-way means of communicating information in the form

of thoughts, opinions, and ideas between two or more individuals with the purpose of building an
understanding.

Types of Communication
The four main categories of communication are

 Verbal – It is a method that uses speech in the form of speaking to convey a message or
information. It is the most popular and effective mode of communication, usually
practised during video conferences, phone calls, presentations, one-on-one conversations,
and meetings. It supports both nonverbal and written communication.

 Nonverbal – It is basically a practice of gestures, facial expressions, and body language

to send information. It can be implemented intentionally and unintentionally when
communicating. For instance, a person can smile unintentionally when they hear an
interesting piece of information or a pleasant idea.
  Written – It is all about typing, printing symbols, numbers, letters, and writing to send a
piece of information. Sometimes used to record information for evidence or reference
purpose. In general, the written style of communication is used in books, blogs,
pamphlets, memos, and letters to share and spread information. In the workplace, e-mail
is a common example of written communication.

 Visual – It uses art, photographs, sketches, graphs, charts, and drawings, to pass on the
information. It is used especially during presentations to present to give a visual effect
and support written or verbal communication.

Communication Process
The communication is a process that starts with the development of thoughts by a sender who
conveys the message using a various channel to the receiver, who then sends him a message as
feedback. There are seven main components of the communication process:

 Sender – Here, the sender conceptualizes the idea or the conversation he wants to convey
it to the recipient.
 Encoding – Now the sender starts the encoding process where he utilizes words or non-
verbal means to translate the thought into a message.
 Message – After encoding, the sender receives the message that he wants to send.
 Communication Channel – The sender then decides through which medium or channel
he/she wants to send the message to the recipient. They must choose the channel to have
an effective and correct interpretation of a message to the recipient.
 Receiver – The receiver receives the message and tries to comprehend in the best
possible way.
 Decoding – In this step, the receiver translates the sender’s information and tries to
perceive it most suitably.
 Feedback – It is the last step of the communication process that assures the recipient, has
received the information and understood correctly as the sender designed it.
The above mentioned is the concept, that is elucidated in detail about ‘Types of Communication’
for the Commerce students. To know more, stay tuned to BYJU’S.

Also See:
 Barriers to Effective Communication

 Barriers in Communication

COMMERCE Related Links

Market Demand Curve Banking And Its Types
Limited Liability Partnership Multiplier Mechanism
COMMERCE Related Links
Difference Between Cash Flow And Fund Flow Techniques Of Scientific Management
Change In Profit Sharing Ratio Profit Sharing Ratio
Kinds Of Companies Value Added Method

Consumer Protection Act - Rights and

Responsibilities
What is the Consumer Protection Act?
The Consumer Protection Act, implemented in 1986, gives easy and fast compensation to
consumer grievances. It safeguards and encourages consumers to speak against insufficiency and
flaws in goods and services. If traders and manufacturers practice any illegal trade, this act
protects their rights as a consumer. The primary motivation of this forum is to bestow aid to both
the parties and eliminate lengthy lawsuits.

This Protection Act covers all goods and services of all public, private, or cooperative sectors,
except those exempted by the central government. The act provides a platform for a consumer
where they can file their complaint, and the forum takes action against the concerned supplier
and compensation is granted to the consumer for the hassle he/she has encountered.

Consumer Rights and Responsibilities:

The Rights of the Consumer

 Right to Safety- Before buying, a consumer can insist on the quality and guarantee of the
goods. They should ideally purchase a certified product like ISI or AGMARK.
 Right to Choose- Consumer should have the right to choose from a variety of goods and
in a competitive price.
 Right to be informed- The buyers should be informed with all the necessary details of
the product, make her/him act wise, and change the buying decision.
 Right to Consumer Education- Consumer should be aware of his/her rights and avoid
exploitation. Ignorance can cost them more.
 Right to be heard- This means the consumer will get due attention to express their
grievances at a suitable forum.
 Right to seek compensation- The defines that the consumer has the right to seek redress
against unfair and inhumane practices or exploitation of the consumer.
The Responsibilities of the Consumer
  Responsibility to be aware – A consumer has to be mindful of the safety and quality of
products and services before purchasing.
 Responsibility to think independently– Consumer should be well concerned about what
they want and need and therefore make independent choices.
 Responsibility to speak out- Buyer should be fearless to speak out their grievances and
tell traders what they exactly want
 Responsibility to complain- It is the consumer’s responsibility to express and file a
complaint about their dissatisfaction with goods or services in a sincere and fair manner.
 Responsibility to be an Ethical Consumer- They should be fair and not engage
themselves with any deceptive practice.
Also Read: Important Questions for Consumer Protection

How to File a Complaint?

 Within two years of purchasing the product or services, the complaint should be filled.
 In the complaint, the consumer should mention the details of the problem. This can be an
exchange or replacement of the product, compensation for mental or physical torture.
However, the declaration needs to be reasonable.
 All the relevant receipts, bills should be kept and attached to the complaint letter.
 A written complaint should be then sent to the consumer forum via email, registered post,
fax or hand-delivered. Acknowledgement is important and should not be forgotten to
receive.
 The complaint can be in any preferred language.
 The hiring of a lawyer not required.
 All the documents sent and received should be kept.
Must Read: Consumer Protection Study Material

The above mentioned is the concept, that is elucidated in detail about ‘Consumer Protection Act’
for the Commerce students. To know more, stay tuned to BYJU’S.

Important Topics in Business Studies:

 Types of Entrepreneurship
 What is Marketing Mix
 Marketing vs Branding
 What is Stock Exchange?

COMMERCE Related Links