It may be noted that savings make possible capital accumulation. Normally, when wages are relatively low, increases in wages will tend to lead to an increase in the supply of labour. 4. 5. Moreover, when a seller sells a commodity he parts with it. Earlier writers used to consider management control one of the chief functions of the entrepreneur. (2) That almost everything is produced to satisfy the needs of the workers, who are the main consumers. The creation of capital depends on two things: (a) Savings and (b) a diversion of resources (from the production of consumption goods to meet current needs to the production of capital goods to meet future needs). But, it is occupationally mobile. Important Questions for Class 9 Social Science Economics Chapter 1 The Story of Village Palampur. Very few people have these rare qualities. Economics is a social science concerned with the production, distribution, and consumption of goods and services. Economists traditionally divide the factors of production into four categories: land, labor, capital, and entrepreneurship. However, new discoveries are often stimulated by high prices (as in the case of Calcutta’s Salt Lake area), and like that of oil in the U.K.’s North Sea, which tend to moderate price increases. Basically, it just means a are examples of capital. In consequence, the prices of land and natural resources tend to be extremely sensitive to changes in consumer demand, rising sharply if they become more desirable. Capital has, therefore, been defined as ‘produced means of production.’ It is a man-made resource. It may apparently seem that labour is the most mobile of all factors—both occupationally and geographically. Even in ancient times, capital was created for producing food, hunting animals and for the transportation of goods. Secondly, some risks, however, cannot be insured against because their probability cannot be calculated accurately. Q.8. Springer Link. In fact, production can never take place without some risk being involved; the decision to produce something has to be taken in anticipation of demand and there must be some element of uncertainty about that demand materialising. Working conditions are of central importance to workers. The above description indicates the supreme position of the entrepreneur in production. Share Your Word File The entrepreneur under­takes both these risks in production. Since land is a gift of nature, it has no cost of production. The essential characteristics of the business firm is that it purchases factors of production such as land, labour, capital, intermediate goods, and raw material from households and other business firms and transforms those resources into different goods or services which it sells to its customers, other business firms and various units of the government as also to foreign countries. Gross National Product (GNP) is Gross Domestic Product (GDP) plus net factor income from abroad. Moreover, he is to decide the scale of production and the proportion in which he combines the different factors he employs. This two-fold function is performed by the organiser or the entrepreneur. In the modern economy, economists classified these factors into two categories. SST Economics Class 9 comprises 20 Marks from a total of the 80 Marks Class 9 Social Science board exam. Before publishing your Articles on this site, please read the following pages: 1. Since the primary purpose of economic activity is to produce utility for individuals, we count as production during a time period all activity which either creates utility during the period or which increases ability of the society to create utility in the future. Finally, labour services are enhanced by training: Skill acquisition is often a lengthy and costly process. This is due to the fact that risk is borne by the share­holders and the day-by-day control of the business is generally in the hands of salaried managers or managing directors. The science that deals with the production, distribution, and consumption of commodities. At that stage capital goods consisted of simple tools and implements. Let us make an in-depth study of the meaning, definition, types and factors of production. "Gross Domestic Product." • This village has two primary and one high school and also has a primary health centre run by the government and one private dispensary. But if he goes out for a joy ride in his motor car, he is using it as a consumption good. Management and control of the business are conducted by the entrepreneur himself. The people involved in production use their skills and efforts to make things and do things that are wanted. Of course, the effective supply of agricultural (farm) land can be increased by drainage, irrigation and use of fertilisers. In short, capital formation depends on savings, which, in its turn, depends on two things: The capacity to save depends on income and the existence of savings institutions like banks, insurance companies, post offices, stock exchanges, etc. ‘Labour’ is the collective name given to the productive services embodied in human physical effort, skill, intellectual powers, etc. A man’s wages are asso­ciated with his productivity or efficiency and this, in its turn, depends on a variety of factors including the education and job training he has received, his innate skill and the extent to which he is motivated to put his best effort in the work he is doing. There are many ways to define the term.The University of Toronto’s Department of Economics has the following definition:“Economic activity is the process by which the stock of resources or stock of capital produces a flow of output of goods and services that people utilize in partial satisfaction of their unlimited wants.”“This process involves not only the production of goods and services but their distribution among the various mem… Land; In its simplest form, land is the physical place where any economic activity takes place. Production is an important economic activity. In this sense, land differs from both labour (which has to be reared, educated and trained) and capital (which has to be created by using labour and other scarce resources or by spending money). This being so, and because in economics an important task is to measure changes in the volume of pro­duction, it is necessary to add the qualifying clause ‘through exchange’, i.e., in return for money, to the definition of production. In the business world, however, capital is always expressed in terms of money. Federal Reserve Bank of St. Louis. This definition makes it clear that, in economics, we do not treat the mere making of things as production. Circulating capital refers to funds embodied in stocks and work-in- progress or other current assets as opposed to fixed assets. It may be pointed out in this context that the same article may, at one time, be a con­sumption good and, at another time, capital, depending on the use to which it is put. People use capital for another important reason to produce goods with less effort and lower costs than would be the case if labour were not assisted by capital. Bureau of Economic Analysis. Workers can move both freely from one industry to another and from one region to another. Anything that helps in production is the factor of production. Therefore, the supply of lands is strictly limited. The earning of capital, i.e., the price that has to be paid for it, is known as interest. It involves the establishment of co-ordination and co-operation among these factors. Write about non farming activity in palampur, What are the positive and negative aspects of green revolution, How is land distributed among the farmers of PalampurHow is land distributed among the farmers of Palampur, what are merit and demerit of green revolution, describe the requirements of production of goods and services. Production may also refer to the goods being produced. Profit is the reward for successful conduct of business. So, the entrepreneur is the person who takes the charge of supervising the organisation of production and of framing the necessary policy regarding business. We have already identi­fied certain things described as capital in our discussion on producers’ goods. They do not get used up in production. In fact, the resources of any community, referred to as its factors of production, can be classified in a number of ways, but it is common to group them according to certain characteristics which they possess. Labour, however, is perishable in this that if the labourer is not able to sell his services for a day he cannot get the value for that day. Here we have given NCERT Extra Questions for Class 9 Social Science SST Economics Chapter 1 The Story of Village Palampur. Description: GNP measures the monetary value of all the finished goods and services produced by the country's factors of production irrespective of their location. Land provides both space and specific resources”. Welcome to EconomicsDiscussion.net! To put it more clearly, capital is that part of wealth which is not used for the purpose of consumption but is utilised in the process of production. In this context, we may refer to the sharp increase in the price of building land in Bombay in the last five decades. TOS4. Both are determined by different factors. Define the meaning and aim of production. It studies how individuals, businesses, governments, and … Meaning of Production: . produced means of production). Some capital equip­ment is mobile in both the geographical and occupational sense. These factors might, therefore, remain idle. Such equipment can be used effectively in a wide variety of industries and are capable of moving from one location to another at very little cost. The second requirement for production is labour or workforce. Land as a production factor also includes other natural resources like water, forests and minerals found in the earth’s crust. Economics is the study of the production, distribution, and consumption of wealth in human society, but this perspective is only one among many different definitions. But the basic functions of the entrepreneur-organisation, management and risk-taking are the same in all industries. Fisheries, rivers, lakes, etc. You cannot use a $50 bill to hammer a nail into wood or transport a shipment of merchandise. They are the inputs for the process of production. However, land also includes all the natural resources found on it. This means that the supply of land to a particular use is fairly (if not completely) elastic. Although the total supply of land is fixed, land has alternative uses. Disclaimer Copyright, Share Your Knowledge Fifthly, the individual must be present when the labour services are used and thus a fifth feature is that labour services are not transferable: For example, a person who has agreed to carry out certain tasks cannot transfer his services to someone else to do the work, while he does something else. Privacy Policy3. “Production is any activity directed to the satisfaction of other peoples’ wants through exchange”. Labour differs from land in an important way. Each such equipment can only be used for a specific purpose. But this is not the only function of the entrepreneur. However, adjust­ments in the labour market, such as increasing the supply of a particular skill, often requires a long time. He may gain the satisfaction of his services, but he cannot be separated from the labour. Such inputs are called fixed capital. As Alfred Marshall has put it “while the part which nature plays in production shows a tendency to diminishing return, the part which man plays shows a tendency to increasing return”. In other words, what is bought and sold is the service of labour, not labour itself. But the labour can supply his labour only when he goes with it. Also capital is measured in terms of money. Economics is divided into two types – Macroeconomics and Microeconomics. This is why the supply curve of labour bends back to the left and this is often cited as an important exception to the (empirical) law of supply. So, it logically follows that the entire return from land—called rent—is a surplus income (at least from society’s point of view). The business-person thinks of money as capital because he can easily convert money into real resources like tools, machines and raw materials, and use these resources for the production of goods. Economics (/ ɛ k ə ˈ n ɒ m ɪ k s, iː k ə-/) is the social science that studies how people interact with value; in particular, the production, distribution, and consumption of goods and services.. Economics focuses on the behaviour and interactions of economic agents and how economies work. In brief, he is to make vital business decisions relating to the purchase of productive factors and to the sales of the finished goods or services. The next major function of the entrepreneur is to make necessary arrangement for the division of total income among the different factors of production employed by him. Download free printable assignments for CBSE Class 9 Economics with important chapter wise questions, students must practice NCERT Class 9 Economics assignments, question booklets, workbooks and topic wise test papers with solutions as it will help them in revision of important and difficult concepts Class 9 Economics.Class Assignments for Grade 9 Economics, printable … In general, the supply of labour varies directly with wages and compensation. Here we have given The Story of Village Palampur Class 9 Economics Chapter 1 Notes. Q.7. Answer: Production is the creation of value in a commodity, e.g., manufacturing of a car from steel. Broadly, there are two kinds of risk which he has to face. But enterprise is a separate factor because the first three factors are substitutable to some extent, but the fourth factor is a specific factor and cannot be substituted by any other factor. 3. Risk-taking is perhaps the most important function of an entrepreneur. This calls for a sacrifice of current consumption. It means that resources otherwise used to produce consumer goods are set aside for producing capital goods. (1) the rate of interest and (2) stability in the value of money (i.e., the rate of inflation). If it stated as percentage of the principal, represen­ting the sum paid by a borrower who needs finance to purchase a piece of capital equip­ment. Many buildings however, can be put to better uses. Land is not geographically mobile. This includes production in manufacturing industry, viz., turning out semi-finished and finished goods from raw materials and intermediate goods— conversion of flour into bread or iron ore into finished steel. How to use economics in a sentence. Since land is already in existence, no costs are to be incurred in creating it. In such countries people make use of simple ploughs, axes, bows and arrows, and leather bags to carry water. In other words, it is the act of foregoing current consumption. This simply means that as more and more workers are employed on the same plot of land, output per worker will gradually fall (because each additional worker will make less and less contribution to total product). They change the form of the goods under concern, in order to satisfy a greater human want.For example, changing a log of wood into a table or chair is a manufacturing process. In fact, much of the services of land required expenditure of resources to obtain or maintain them and hence they are often called capital (i.e. Inputs like raw material and the money used for buying it, paying electricity bills and the wages of workers, etc. These inputs are called physical capital or simply capital. The Federal Reserve Bank of St. Louis says that in this case, it does not class money as capital because it is not a productive resource. An entrepreneur is to determine what to produce, how to produce, where to produce, how much to produce, how to sell and so forth. From the above definition, it is quite clear that land includes farming and building land, forests, and mineral deposits. Saving is the difference between current income and current consumption. It refers to human effect of any kind—physical and mental— which is directed to the production of goods and services. Table 5.1: A Classification of Factors of Production: Each factor gets a reward on the basis of its contribution to the production process, as shown in the table. 5. Capital, the third agent or factor is the result of past labour and it is used to produce more goods. They are artificial entities created by individuals for the purpose of organising and facilitating production. land, labour, physical capital and human capital. TopperLearning provides study materials for ICSE Class 9 Economics which will help you to get a better score in the final examination. Physical capital includes inputs like machinery and tools, money and raw material required for production. 6. Many of the old buildings used as cinema house or god-owns in northern area of Calcutta have been dismantled and converted into multi-storeyed buildings. And the equipment they use is called capital, which refers to all man-made resources. When incomes are relatively high, therefore, higher wage rates may actually lead to a fall in the number of hours worked (and, thus, in the amount of labour offered by an individual worker.) The same plot of land can be used to set up factories or to grow wheat or sugarcane or even to build a stadium. Resources, which we shall call factors of production, are combined in various ways, by firms or enterprises, to produce an annual flow of goods and services. For example, the miner or the air- hostess runs the risk of personal injury and life and most forms of labour run the risk of unemployment. Human capital is the knowledge and effort that is put in to arrange for the other factors like land, labour and physical capital to start the production of goods or services. But this is often offset by various kinds of soil erosion. The quality of life of an individual gets affected. Since most of the resources necessary to carry on production are scarce relative to demand for them they are called economic resources. Economics definition is - a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services. If we will buy something we must want it; if we are not willing to buy it then, in economic terms, we do not want it. If people choose not to buy some consumer goods, with some part of their current income, they refrain from buying (utilising) the services of the factors required to make those goods. But before we proceed further we may make a passing reference to factor mobility. The term ‘labour’ is used to refer to the flow of labour service per unit of time. It is lost forever; it is because of this that labour has a weak bargaining power. One conse­quence of having to ‘deliver’ the services personally is that employees have strong views on how their services should be used. Both of these definitions are interchangeable. This is particularly true in the capitalistic or even mixed economy which is based on the price-profit system. Fixed capital means durable capital like tools, machinery and factory buildings, which can be used for a long time. The test of whether or not any activity is productive is whether or not anyone will buy its end-product. They are generally described as manufacturing and construction industries, such as the manufacture of cars, furnishing, clothing and chemicals, as also engineering and building. Another important feature of land is that it is not homogeneous. So the latter must possess a high degree of management ability to select the right type of persons to work with him. Four factors of Production: Four factors or basically the requirements to produce anu goods or services. This is not a very simple matter, which can be covered unambiguously by a contract of employment. Another important point to note is that labour is not only a factor of production. What is the definition of production? The reward or price that is paid to labour in return for the services it performs is known as a wage or salary. But this is not the whole truth. This is the second step—the diversion of resources for the production of consumer goods to the production of capital (producers) goods. Some inputs like the building of a factory and the tools and machinery installed in it can be repeatedly used for production year after year. Hope given Extra Questions for Class 9 Social Science Economics Chapter 2 are helpful to complete your homework. Another distinguishing function of the entrepreneur as emphasised by Schumpeter, is to make frequent inventions- invention of new products, of new techniques and discovering new markets—to improve his competitive position, and to increase earnings. It increases economic overload, i.e., the dependence of unemployed on the working population. Such equipment are not even occu­pationally mobile. The supplier of labour—the worker—is also a consumer. See more. In most parts of India, for example, land has many alternative uses. Meaning and definition of Economics; Concepts of Economics: Wealth, Welfare, Capital, Factors of production, Utility, Government, Household, Firm, Value, Price, Production, Consumption, Micro and Macro Economics. 1. Tools and machinery, bullocks and ploughs, seeds and fertilizers, etc. They are land and labour, as capital is created by the application of labour on land and an entrepreneur is the human resource who performs and controls the business. An example of this is the labour which assists in the process of bringing minerals to the surface. Examples cover distributive traders, banking, insurance, transport and communications. Marshall’s Welfare Definition: Alfred Marshall in his book ‘Principles of Economics published in … In this context, merchandise means goods). Examples of such capital equipment are electric motors, machine tools, hand tools, typewriters, and lorries. Description: Gross National Product (GNP) is Gross Domestic Product (GDP) plus net factor income from abroad.It measures the monetary value of all the finished goods and services produced by the country’s factors of production irrespective of their location. Land as a production factor also includes other natural resources like water, forests and minerals found in the earth’s crust. The first requirement for production is land. The worker sells his services in the market, but retains his capital (working ability). 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