Basics of Economics

Basics of Economics

What is economics?

• In 1776, Adam Smith, father of modern Economics, published Wealth of Nations, where he defined Economics as an enquiry into nature and causes of wealth of Nations.
• Types of economics-
  • Macroeconomics
    • The branch of Economics is concerned with large-scale economic factors as fiscal policy, monetary policy, and national productivity.
    • Concentrates on the behavior of the economy as a whole.
    • Examples: Employment, national income, poverty, etc.
  • Microeconomics
    • Study of individuals, households & firms behaviour in decision making & allocation of resources.
    • Example: Demand, supply, pricing, Production & Consumption.

Sectors of Economy

• Based on Activity

  • Primary Sector:
    • Includes all activities that are engaged in the extraction of natural resources or the production of raw materials.
    • Example: Farming, fishing, mining, extraction of oil and gas, etc.
    • People engaged in this sector are called  Red-collar workers.
  • Secondary Sector:
    • Industries that are concerned with the manufacturing of usable products or finished goods. 
    • Uses the produce of the primary sector as its raw materials.
    • All manufacturing, processing & construction activities included.
    • People engaged in this sector are called Blue collar workers.
  • Tertiary Sector:
    • It describes all activities that provide services to other Sectors (Primary + Secondary Sector) or final consumers.
    • Example: Retail sector, Tourism, Banking, medical and health care services, etc.
    • People engaged this sector are called White collar workers.
  • Quaternary Sector:
    • This sector deals with knowledge or intellectual pursuits including research and development (R&D), business, consulting services, and education.
    • It enables entrepreneurs to innovate and improve the quality of services offered in the economy.
  • Quinary Activities:
    • This sector focuses on the creation, re-arrangement and interpretation of new and existing ideas; data interpretation and the use and evaluation of new technologies.
    • Example: Highly paid skills of senior business executives, government officials, etc.
    • Referred to as gold collar professions.

• Based on Work Condition

  • Organized Sector:
    • In this sector, terms and conditions of employment are regular and as per rules and regulations passed by the Government or private enterprises (assured work, fixed hours and social security).
    • Examples: Hospitals, Schools, etc.
  • Unorganized Sector;
    • These sectors are generally not governed by the rules and regulations that are laid down by the Government regarding the condition of employment.
    • It is characterized by small and fragmented units which are mostly outside the control of the government.
    • The sector is marked by low wages, no provision for overtime, paid leave, holidays, leave due to sickness, no job security, etc.
    • The unorganized sector is mainly labour intensive and uses indigenous technology.

• Based on Asset Ownership

  • Public Sector:
    • The government owns most of the assets and is concerned with providing various governmental services.
    • Governments raise revenue through taxes, cess, etc. to meet expenses on the services rendered by it.
  • Private Sector:
    • The ownership of assets and delivery of services is in the hands of private individuals or companies.
    • Activities are guided by the motive to earn profits. Consumers need to pay for the services.
  • PPP (Public Private Partnership):
    • PPP involves collaboration between a government agency and a private-sector company to finance, build, and operate projects, such as public transportation networks, parks, convention centers, etc.