CBSE class 12 commerce Economics fast track revision notes
CBSE class 12 commerce Economics fast track revision notes:- we provide complete details of CBSE class 12 commerce Economics fast track revision notes in this article.
CBSE class 12 commerce Economics fast track revision notes:-Economics is all about CBSE class 12 commerce Economics fast track revision notes
1. 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. 2. Economics was used to mean home management with limited funds available in the most economical manner possible.
3. Economics has been defined in many different ways:
(a)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.
(b)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.
CBSE class 12 commerce Economics fast track revision notes:-Microeconomics and Macroeconomics
1. Microeconomics deals with the behaviour of individual decision-making units such as consumers, resource owners, etc. It is also called Price theory. 2. Macroeconomics deals with aggregate such as national income, aggregate consumption, etc. It is also called Theory of Income and Employment.
3. Both micro and macro economics are complementary and should be utilised for proper understanding of an economy.
CBSE class 12 commerce Economics fast track revision notes:-Central Problems of an Economy
1. Basic economic problem is the problem of choice which is created by the scarcity of resources. It is also called problem of economising the resources, i.e., the problem of fuller and efficient utilisation of the limited resources to satisfy maximum number of wants.
2. Main causes of central problems are unlimited human wants, limited economic resources and alternative uses of resources.
3. Resources of factors of production can be natural like (land, air), human (i.e., labour), capital (like machines, building) and entrepreneurial (i.e., a person who bears risk).
4. Central problems facing every economy are:
(a)Allocation of resources
(i) What to produce and how much to produce?
(ii) How to produce? (iii) For whom to produce?
CBSE class 12 commerce Economics fast track revision notes:-Production Possibility Curve and Opportunity Cost
- It is a useful device to graphically explain the central problems of an economy. It indicates the various combinations of goods and services which can be produced by full and efficient utilisation of all resources of an economy.
- It is downward sloping concave to the origin curve.
- Slope of PPC is called MRT or Marginal Opportunity Cost. Slope of PPC is increasing showing that if a country wants to produce more of good X it has to give up increasing number of units of good Y it is called law of increasing marginal opportunity cost.
- Any point inside the curve shows inefficient utilisation of resources and any point outside the curve is unattainable because of scarcity of resources.
- Opportunity cost is the cost of alternative opportunity gives up. Production possibility curve is called opportunity cost curve at every point measures opportunity cost of good X in terms of good Y given up.
CBSE class 12 commerce Economics fast track revision notes:-Production Possibility Curve and Central Problems
The production possibility curve solves five problems – what and how much to produce, how to produce, full utilisation of resources, economic efficiency and economic growth. All points on the curve solves problems of what and how much to produce, how to produce, full employment of resources and economic efficiency. Production possibility curve is unable to solve the economic problem ‘for whom to produce’.
CBSE class 12 commerce Economics fast track revision notes:-KEY CONCEPTS
• Macro Economics: Its meaning
• Consumption goods, capital goods, final goods, intermediate goods, stock and flow, gross investment and depreciation.
• Circular flow of income
• Methods of calculation of national income
• Value added method (product method)
• Expenditure method
• Income method
• Concepts and aggregates related to national income
• Gross national product
• Net National product
• Gross and Net domestic product at market price and at factor cost.
• National disposable income (Gross and net)
• Private income
• Personal income
• Personal disposable income
• Real and Nominal GDP
• GDP and welfare
Macro Economics: – Macroeconomics is the study of aggregate economic variables of an economy.
Consumption goods:- Are those which are bought by consumers as final or ultimate goods to satisfy their wants. Eg: Durable goods car, television, radio etc. Non-durable goods and services like fruit, oil, milk, vegetable etc. Semi durable goods such as crockery etc.
Capital goods – capital goods are those final goods, which are used and help in the process of production of other goods and services. E.g.: plant, machinery etc.
Final goods: Are those goods, which are used either for final consumption or for investment. It includes final consumer goods and final production goods. They are not meant for resale. So, no value is added to these goods. Their value is included in the national income.
Intermediate goods intermediate goods are those goods, which are used either for resale or for further production. Example for intermediate good is- milk used by a tea shop for selling tea.
Stock: – Quantity of an economic variable which is measured at a particular point of time. Stock has no time dimension. Stock is static concept. Eg: wealth, water in a tank.
Flow: Flow is that quantity of an economic variable, which is measured during the period of time. Flow has time dimension- like per hr, per day etc. Flow is a dynamic concept. Eg: Investment, water in a stream.
Investment: Investment is the net addition made to the existing stock of capital. Net Investment = Gross investment – depreciation.
Depreciation: – depreciation refers to fall in the value of fixed assets due to normal wear and tear, passage of time and expected obsolescence.
Producers (firms) and households are the constituents in a two sectors economy. Households give factors of production to firm and firms in turn supply goods and services to households.
CBSE class 12 commerce Economics fast track revision notes:-Related aggregates
Gross Domestic product at market price
It is the money value of all final goods and services produced during an accounting year with in the domestic territory of a country.
Gross National product at market price:
It is a money value of all final goods and services produced by a country during an accounting year including net factor income from abroad.
Net factor income from abroad: Difference between the factor incomes earned by our residents from abroad and factor income earned by non-residents with in our country.
CBSE class 12 commerce Economics fast track revision notes:-Components of Net factor income from abroad
• Net compensation of employees
• Net income from property and entrepreneurship (other than retained earnings of resident companies of abroad)
• Net retained earnings of resident companies abroad Formulas
• NNP Mp = GNP mp – depreciation
• NDP Mp = GDPmp – depreciation
CBSE class 12 commerce Economics fast track revision notes:-Concept of domestic (economic) territory
Domestic territory is a geographical territory administered by a government within which persons, goods and capital circulate freely. (Areas of operation generating domestic income, freedom of circulation of persons, goods and capital)
Scope identified as
*Political frontiers including territorial waters and air space.
*Embassies, consulates, military bases etc. located abroad but including those locates within the political frontiers.
*Ships, aircrafts etc., operated by the residents between two or more countries.
*Fishing vessels, oil and natural gas rigs etc. operated by the residents in the international waters or other areas over which the country enjoys the exclusive rights or jurisdiction.
Resident (normal resident):- Normal resident is a person or an institution who ordinarily resides in that country and whose center of economic interest lies in that country.
(The Centre of economic interest implies :-
( 1) the resident lives or is located within the economic territory.
(2) The resident carries out the basic economic activities of earnings, spending and accumulation from that location
3. His center of interest lies in that country.
CBSE class 12 commerce Economics fast track revision notes:-Relation between national product and Domestic product.
Domestic product concept is based on the production units located within domestic (economic) territory, operated both by residents and non-residents. National product concept based on resident and includes their contribution to production both within and outside the economic territory.
National product = Domestic product + Residents contribution to production outside the economic territory (Factor income from abroad) – Non- resident contribution to production inside the economic territory (Factor income to abroad)
CBSE class 12 commerce Economics fast track revision notes
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