class 11th commerce notes for free ( Economics)- Drashti Panjrolia

what is Economy and its types 

Economy: - An economy is a system of organizations and institutions that either facilitate or

play a role in the production and distribution of goods and services in a society. Economies

determine how resources are distributed among members of a society; they determine the value

of goods or services; and they even determine what sorts of things can be traded or bartered for

those services and goods.

Three Types of economy:

1. Market/capitalist economy: - In this type of Economy the factors of production are

owned and operated by individuals or group of individuals. Main objective of production is self

interest or profit maximization. Central problems are solved by price mechanism or market

forces of demand & supply.

2. Planned/centrally planned/ socialistic economy: - Factors of production are owned and

operated by Govt. Main objective of production is social welfare. Central problems are solved by

central planning authority.

3. Mixed Economy: - The Economy in which factors of production are owned and

operated by both Govt. and private sector. Main objective is profit maximization (private sector)

and social welfare (Government sector). Central problems are solved by central planning

authority(in public sector) and price mechanism (in private sector)

Economics: - Economics is a branch of social science focused on the production, distribution

and consumption of goods and services. The origin of economics can be traced to Adam

Smith’s book, ‘An inquiry into the Nature and Causes of Wealth of Nature’ published in the

year 1776. Economics was used to mean home management with limited funds available in the

most economical manner possible.

The word 'economics' comes from two Greek words, 'eco' meaning home and 'nomos' meaning accounts. The subject has developed from being about how to keep the family accounts into the

wide-ranging subject of today.

Economics is actually:-

• economics is about the study of scarcity and choice

• economics finds ways of reconciling unlimited wants with limited resources

• economics explains the problems of living in communities in terms of the

underlying resource costs and consumer benefits

• economics is about the co-ordination of activities which result from specialisation

Definition of Economics: - Robbins emphasises that economics is a study of human

behaviour, where there is a relationship between ends and scarce means and that the scarce

means have alternative uses.

Samuelson’s definition of economics is most comprehensive, relevant and accepted. The

definition includes both the aspects of economics, i.e., distribution of limited resources and

problem of economic development.

Note: The author does not claim any originality of this work. This information is collected from various books as read by author.