Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics Complete Notes

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics Complete Notes

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics :  Karnataka Secondary Education Examination Board came in to existence in the year 1966, has been conducting SSLC and other examinations. Every year the studentstrength is increasing tremendously.

Every year in April about 8.50 Lakhs & in June 1.50 Lakhs students are appearing for the SSLC examinations. The board has decided to improve the evaluation system and the results, has set up divisional offices of the Board. This decentralization caters to the need of the student needs at their proximity. The board is now providing Admission Tickets with student photographs and major breakthrough in this venture is the photos being used in the repeaters Admission Tickets also.

The board has ventured to conduct the supplementary examination for the failed candidates of the examination of March in June month of every year itself; this will enable the students who would be successful in the June examination to join higher education courses in the same academic year from July itself. This process was introduced first time in the country.

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics Complete Notes

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics : Economics is the social science studying the production, distribution and consumption of goods and services. It is a complex social science that spans from mathematics to psychology. At its most basic, however, economics considers how a society provides for its needs. Its most basic need is survival; which requires food, clothing and shelter. Once those are covered, it can then look at more sophisticated commodities such as services, personal transport, entertainment, the list goes on. Today, this social science known as “Economics” tends to refer only to the type of economic thought which political economists refer to as Neoclassical Economics. It developed in the 18th century based on the idea that Economics can be analysed mathematically and scientifically.

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Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics Complete Notes

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics : This is an elementary introduction to a vast field. We have deliberately refrained from bringing in many of the refinements of theory and for two reasons. First of all, these refinements seem more appropriate to a text for an intermediate course in economics. In the second place, the basic principles as developed in this book seem to provide an adequate foundation on which men of good judgment can build conclusions and recommendations.

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics Complete Notes

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics : We have to perform various and varied activities throughout the day. Have you ever thought the ultimate end of you studies. If this question is asked from the students of class XII, they may probably answer that they want to be a doctor, an engineer, a chartered accountant, an artist, a teacher, a businessman or an economists etc. All the students may not attain their objectives. After their studies some of them may remain unemployed or underemployed and others may be suitably employed. In case, the individuals are physically and mentally fit, they try to establish themselves in certain business, profession or employment. After attaining adulthood, we have our own family and we are required to make arrangement for food, clothes, house and other necessaries of life for the members of our family. We have to activate ourselves to earn something, so that we may be able to meet the expenses. Our activities to generate income are termed as economic activities, which are responsible for the origin and development of Economics as subject.

Economics was originally introduced as a science if statecraft. It was concerned with the collection of revenue for the state i.e., government. Advisors to the government were also required to point out the best possible way of spending the revenue. The growth of trade, industry and commerce after industrial revolution in the eighteenth century required that the functions of the state should be specified. Political economy emerged as the result of the efforts to define functions of the state. Wealth was identified as the source and means to satisfy our various wants, so wealth was emphasised. Adam Smith, generally known as the father of Economics defined Economics as ‘science of wealth’.

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics Complete Notes

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics : A generally accepted notion of Value is the worth of goods and services as determined by markets. Thus an important part of Economics is the study of policies and activities for the generation and transfer of Value within markets in the form of goods and services. Often a measure for the worth of goods and services is units of currency such as the US Dollar, peso, etc… But, unlike the units of measurements in Physics such as Seconds for Time, there exists no absolute basis for standardizing the units for Value. Usually the value of a currency is related to the value of Gold, which in turn is valued by amount or number of goods and services that it can be exchanged for. Because the rate of production of gold in the world is slower than the rate of creation of goods and services, the relation between gold and currencies is not as strict as it used to be.

What is Value?

Thus, one of the most complicated and most often misunderstood parts of economy is the concept of value. One of the big problems is the large number of different types of values that seem to exist, such as exchange-value, surplus-value, use-value

The discussion of values all start with one simple question: What is something worth?

Today’s most common answer is one of those answers that are so deceptively simple that it seems obvious when you know it. But then remember that it took economists more than a hundred years to figure it out: Something is worth whatever you think it is worth. In 1st century BC, Publilius Syrus wrote: “Something is only worth what someone is willing to pay for it”.

This statement needs some explanation. Take as an example two companies that are thinking of buying a new copying machine. One company does not think they will use a copying machine that much, but the other knows it will copy a lot of papers. This second company will be prepared to pay more for a copying machine than the first one. They find different utility in the object.

The companies also have a choice of models. The first company knows that many of the papers will need to be copied on both sides. The second company knows that very few of the papers it copies will need double sided copying. Of course, the second company will not pay much more for this, while the first company will. In this example, we see that a buyer will be prepared to pay more for the increase in utility compared to alternative products.

But how does the seller value things? Well, in pretty much the same way. Of course, most sellers today do not intend to use the object he sells himself. The utility for the seller is not as an object of usage, but as a source of income. And here again it is marginal utility that comes in. For which price can you sell the object? If you put in some more work, can you get a higher price?

Here we also get into the resellers utility. Somebody who deals in trading will look at an object, and the utility for him is to be able to sell it again. How much work will it take, and what margins are possible?

So not only do the two different buyers have a different value on an object, the salesman puts his value on it, and the original manufacturer may have put yet another value on it. The value depends on the person who does the valuation, it is subjective.

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics Complete Notes

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics :  A market is an often national but increasingly international legally, autonomous or semi-autonomous, defined place, system or arrangement. Where economic agents (producers, facilitators, sellers, buyers, investors and speculators, etc) come into close contact with each other for the purpose of economic transactions. Not only can it simply consist on an limited electronic marketplaces such as eBay but in its broader sense markets are aggregated specific around their rules or intrinsic uniqueness. The things that congregates agents or product(s).

We can for instance refer to the wine market (that is specific without more context to all the things related to the national wine economy) but we can also specify the global Porto market (that is specific to a specific type of wine, national regarding the Porto brand) to congregate its global economic agents.

Setting a price

An object’s Value, worth and utility is not something fixed, but instead a subjective property of the object. This subjectivity may be a bit surprising, it is easy to imagine that something must have an objective worth being bought and sold. However this is not the case, in fact, it’s the opposite.

When somebody has an item to sell, he puts a value on this item, and will not sell under that value. Likewise, when somebody wants to buy something, he will put a value on the object, and will not pay more than this. If these valuations overlap, so that the buyer’s valuation is higher than the seller’s valuation, the object will be sold. If the seller’s valuation is higher than the buyer’s, the buyer will simply say “it’s not worth it” or the seller will say “it’s worth more than that” and no deal will be made.

Free and Regulated markets

The description above is of a free market, where anyone can buy and sell, and where price is set by buyer and seller alone. This is not always the case. Instead many markets are regulated.

While the national government may hold the ultimate control over national affairs, at least to some degree, depending on its level of political/economical independency, often it will delegate the power to private or non-governmental public authorities, even to supra national or international institutions to oversee the regulatory needs, internationally there may be also be other regulations due to treaties and accords.

Money

Money is such an obvious and integral part of today’s society, that it is sometimes difficult to imagine society without it. It’s also a very abstract concept, and can be hard to grasp. It comes in many forms, from special types of sea-shells, to pigs, and via the paper and coin system to digital blips in a computer. But what is money, really?

As we have seen, people value things differently. But communicating this value to somebody else is a problem. The only way you can communicate this value is by comparing it with other things. But since all others, just like you, have subjective values, it becomes complex and confusing.

The essence of money

So in essence, money is a common value system. It quantifies the value of an object in a way that everyone understands, and it makes communicating with others simpler. Instead of weighing the values of the shoes against the lamp against the chair, you can set a number on it. You can say that your chair is worth five units, the lamp maker can value his lamp to three units and the shoemaker thinks his shoes are worth four units. We can now instantly and easily compare values. Trading suddenly got much easier.

Supply and Demand

The principle of supply and demand is one of the best-known principles of economic theory. It was first posited by Jean-Baptiste Say, an 18th-century Classical Political Economist who suggested that demand and supply are interrelated. His theory was that the more people want something, the higher the demand is for it and the more they will value it. So if something is in low supply but in high demand the value is increased, as it will decrease if there is an abundance or a low demand for the that item. For example: There are 100 dolls and 400 people that want those dolls. Since there are more people than there are dolls, people will pay more money for them.

Capital

Capitalism, as its name suggests, is based on the ownership of capital. What is capital? Basically, capital is anything that can be traded for something else. Any amount of money is capital, as it can be traded for a huge variety of things. Personal items are also capital because they can be sold; houses, cars, and other bizarre items fall under this category. The ability to work can also be considered capital, or labour-power.

Karl Marx first posited that perhaps there was something that separated capital into two broad categories. Some capital is bought, and then the value is fixed; this applies for an item of clothing or food, for instance. Some may lose value and depreciate; cars fall into this category. Some capital, however, can actually produce more capital which can then be sold; this, he argued, is real capital. For example, if you have a cookie-stamper and a van, some flour, butter, and other cookie ingredients, with that capital, you could produce cookies and ship them around in the van selling them for a profit, albeit small.

Karnataka class 12 commerce Economics Chapter 1 Introduction To Economics Complete Notes

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