Explore topic-wise InterviewSolutions in .

The period that comes after the ‘Boom’ is’ called ‘recession’. In a given time period, when economic activity reaches to its peak which in turn takes the investments and employment also to the peak i.e. the highest possible levels, a slowdown occurs. As a result, demand slows down and so do investment and unemployment and recession occur.

The activity of converting raw materials and resources into final goods which satisfy human wants is called production.

During the slowdown in the recession phase when all activities reach a minimum level, it leads to phase called ‘depression’.

Value can be explained from two viewpoints. They are:

1. From viewpoint of use i.e. ‘use-value’
2. From viewpoint of exchange i.e. ‘exchange-value’.

1. Use-value:

• The utility i.e. usefulness of consuming a good (commodity) is called its use-value.
• It refers to how useful does the good become in satisfying the need of the consumer. Use-value is the qualitative aspect of value.

Example:
Food, water, sunlight, etc. have very high use-value for everyone. However, material things like iron, wood, petrol, etc. have use-value only for people who get some benefit out of these commodities.

2. Exchange-value:

• Exchange is the practice of releasing right on something on a condition of receiving an equivalent in return.
• When a commodity/service is exchanged for another commodity/service than the worth of one unit of this commodity is measured in terms of the amount of other commodity for which it is exchanged. Such worth is called exchange-value.

Example:
If 1 kg of wheat can be exchanged for 1 kg of rice then the exchange value of 1 kg wheat is 1 kg of rice.
Relationship Between Use-value and Exchange-value

The utility i.e. usefulness of consuming a good (commodity) is called its use-value.

Changes occurring in repeated manner i.e. in cycles are called cyclic changes.

When nations and governments aim at growth, development, etc. it becomes a subject matter of collective welfare.

Prosperity and enhancement in the standard of living as well as overall life is termed as welfare.

Relationship between wealth and welfare:
(a) For individual wealth:

Generally, as wealth increases, welfare increases. The reason for this is that more wealth increases the capacity to generate monetary value, greater power to exchange goods or purchasing power for the owner and hence greater wellbeing. This is largely true in case of individuals i.e. individual wealth.

(b) For national wealth:

• When national income increases, national wealth can increase. But, the welfare of people will increase only if this national income is distributed proportionately among all sections of the society and among all sectors.
• Nation’s welfare also depends upon social and cultural formation and hence there is not always a direct relation between wealth and welfare in a society.

Wealth must be useful in satisfying human wants or needs. Hence, goods which are useful in satisfying needs of human beings can only be considered as wealth.

Correct option is (A) High exchange value

Exchange is the practice of releasing right .on something on a condition of receiving an equivalent in return.

When a good is used at the intermediate stage of production of a final good or when it is purchased by a producer to produce a final good and it is not directly consumed by the consumers but this good helps in the production of a final good then such a good is called a producers’ good.

Correct option is (B) Unlimited supply

Correct option is (A) Exchange-value

Wealth belonging to the earth that can be treasured by all nations and which can be developed for benefit of all is called international wealth. For example, oceans are such a common wealth which are used as international waterway and benefit all the nations.

Wealth can be classified into two types. They are:
1. Individual wealth and Social wealth:

• Wealth owned by an individual and meant for private consumption is called individual wealth. For example, a house.
• Wealth owned by society and meant for collective consumption is called societal (or social) wealth. For example, a check-dam.

2. National wealth and international wealth:

• Wealth belonging to a nation and possessed and treasured by a nation is called national wealth.
• It directly or indirectly helps to generate exchange value for the nation.
• For example, rivers, mountains, literature and scriptures, etc. are national wealth.
• Wealth belonging to the earth that can be treasured by all nations and which can bo developed for benefit of all is called international wealth.
• For example, oceans are such a common wealth which are used as international waterway and benefit all the nations.

When a commodity/service is exchanged for another commodity/service than the worth of one unit of this commodity is measured in terms of the amount of other commodity for which it is exchanged. Such worth is called exchange-value.

A public garden or the garden of a housing society, a village well, street lights, etc.

1. Individual wealth and social (societal) wealth
2. National wealth and international wealth.

Wealth belonging to a nation and possessed and treasured by a nation is called national wealth. For example, rivers, mountains, literature and scriptures, etc. are national wealth.

Welfare:

• Prosperity and enhancement in the standard of living as well as overall life is termed as welfare.
• The concept of welfare is used by ail philosophies ranging from spiritual sciences to economics.
• All human activities, may they be economic or non-economic are ultimately done with the purpose of improving life or say for welfare.
• Welfare can be measured quantitatively in the context of growth and qualitatively in the context of development.

In economics, welfare can be classified and studied in two parts. They are:

1. Individual welfare: When an individual make efforts to improve his/her standard of living and wellbeing, it becomes a subject of individual welfare.
2. Collective welfare:  When nations and governments aim at improvement, growth, development, etc. it becomes a subject matter of collective welfare

Welfare:

• Prosperity and enhancement in the standard of living as well as overall life is termed as welfare.
• The concept of welfare is used by ail philosophies ranging from spiritual sciences to economics.
• All human activities, may they be economic or non-economic are ultimately done with the purpose of improving life or say for welfare.
• Welfare can be measured quantitatively in the context of growth and qualitatively in the context of development.

In economics, welfare can be classified and studied in two parts. They are:

1. Individual welfare: When an individual make efforts to improve his/her standard of living and wellbeing, it becomes a subject of individual welfare.
2. Collective welfare: When nations and governments aim at improvement, growth, development, etc. it becomes a subject matter of collective welfare.

If a child buys a packet of biscuit from the market that has competition among buyers, he becomes the owner of that packet. All other children will be excluded from having the same packet of biscuit.

Excludability means, once a good is owned and being used by one individual, another individual cannot possess and use it at the same time.

Goods that can be used by many individuals at the same time are called Public goods. These goods possess the characteristics of joint demand and collective consumption.

Wealth owned by society and meant for collective consumption is called societal (or social) wealth. For example, a check-dam.

Durable goods and Perishable goods:

(a) Durable goods:
Goods that can be stored and used repeatedly for a long period of time are called durable goods.
Example: Shoes, clothes, television, refrigerator, etc.

(b) Perishable goods:
Goods that do not last long and can be consumed only once are known as perishable goods.
Example: Milk, fruits, meat, etc.

• If a commodity has high use-value then it is not necessary that it will have a high exchange-value. But if a commodity has high exchange-value then it surely has some use-value.
• Exchange-value of a commodity is determined by the scarcity of that resource compared to its need/use.
• The demand of goods is raised when they have some use-value. If demanded goods are scarce in supply in relation to their demand or if their supply (i.c. availability in the market) is controlled by a few people then they have a higher exchange-value.

Example:

• Precious metals, diamonds, etc. have very high exchange-value.
• A contradictory situation is that if goods are highly useful i.e. have very high use-value and so have very high demand but have unlimited supply then they do not have exchange-value or may even have very low exchange-value.

Example:
(a) Though air and sunlight have very high usefulness for life, they have no exchange-value as they are abundant in supply.
(b) In earlier times, even water was considered a good with high use-value but no exchange-value. However, jn present times, the availability of water is reducing in relation to its need and use by people and so it has started commanding an exchange-value.

• In economics, use of the word ‘value’ is usually in context of ‘exchange-value’ of a commodity with another commodity.
• From this discussion we conclude that ‘value’ means the worth of one unit of a commodity in terms of units of another commodity in exchange.

Price:

• If a commodity is exchanged for money then such monetary exchange-value is termed as ‘price’.
• Price means the exchange-value (or worth) of a commodity measured in terms of units of currency.
  Goods and Services

Commodities which are intangible or do not have a physical existence are called services. Example: Cooking, transportation, telecom, courier, etc. are services.

Correct option is (D) Both (A) and (B)

Correct option is (D) All of these

When an individual make efforts to improve his/her standard of living and wellbeing, it becomes a subject of individual welfare.

Goods that are be possessed and owned by a private individual are called Private goods. These goods possess the characteristics of excludability and competitiveness.

When a consumer consumes a good and the good is capable of directly satisfying a particular want then it is called a consumer good. These goods have passed the final stage of production. Example: Cooked food.

Goods that can be touched and seen are known as physical or tangible goods. Example: Ball, bat, television, refrigerator, stove, mobile phone, etc.

Classification of various goods and services with respect to economics:
1. Physical (Tangible) goods and Intangible goods:
(a) Tangible goods:

• Goods that can be touched and seen are known as physical or tangible goods.
• We can measure quantity of these goods.
• Example: Ball, bat, television, refrigerator, stove, mobile phone, etc.

(b) Intangible goods (services):

• Goods (i.e. activities) that cannot be touched and seen are known as services.
• Services neither have physical existence nor can be measured cardinally. Example: Services of education, medical consultancy, music, cooking, etc.

2. Economic goods and non-economic goods:
(a) Economic goods:

• Goods which have an exchange value in the market are called economic goods.
• Such goods command an exchange value since they are scarce in supply compared to their demand. Moreover their supply can be controlled.
• Example: All goods such as metal, sugar, electronics, books, etc.

(b) Non-economic goods:

• Goods which do not have exchange value are called non-economic goods. Such goods are abundant in supply.
• Though these goods are consumed by people they do not pass through the economic process of production and distribution.
• Example: Sunlight and air.

3. Durable goods and Perishable goods:
(a) Durable goods:

• Goods that can be stored and used repeatedly for a long period of time are called durable goods.
• Example: Shoes, clothes, television, refrigerator, etc.

(b) Perishable goods:

• Goods that do not last long and can be consumed only once are known as perishable goods.
• Example: Milk, fruits, meat, etc.

4. Private goods and Public goods:
Based on their ownership and nature of use goods can be classified as private goods and public goods

(a) Private goods:

• Goods that are be possessed and owned by a private individual are called Private goods.
• The owner of the goods takes all decision regarding these goods.
• These goods possess the characteristics of excludability and competitiveness.
• Excludability means, once a good is owned and being used by one individual, another individual cannot possess and use it at the same time.
• In order to obtain ownership of such excludable goods, individuals need to compete.

Example:

• If a child buys a packet of biscuit from the market that has competition among buyers, he becomes the owner of that packet. All other children will be excluded from having the same packet of biscuit.
• Thus, the individual who pays the price gets the good and others cannot have the same unit. For example, one who does not pay price for a mobile phone, does not get it.

(b) Public goods:

• Goods that can be used by many individuals at the same time are called Public goods.
• These goods possess the characteristics of joint demand and collective consumption.
• Such goods are jointly demanded by many people. If one individual uses it the other cannot be excluded from its use and in this way such goods are collectively consumed. Hence these are called public goods.
• These goods are either provided by the government for all or some people pay for it together.

Example:
A public garden or the garden of a housing society, a village well, street lights, etc.

5. Consumers’ goods and Producers’ goods:
Goods can satisfy human wants directly or indirectly.
(a) Consumers’ goods:

• When a consumer consumes a good and the good is capable of directly satisfying a particular want then it is called a consumer good. These goods have passed the final stage of production.
• Example: Cooked food.

(b) Producers’ goods:

• When a good is used at the intermediate stage of production of a final good or when it is purchased by a producer to produce a final good and is not directly consumed by the consumers but the good helps in the production- of a final good then such a good is called a producers’ good.
• Producers’ goods are partly finished goods that work as inputs (such as raw material) in the production of other goods including final goods.

Example:

• Cotton used to make cloth, machines are used in factories to produce garments, a tractor is used in producing food grains, a utensil used to cook food, etc. .
• Producers’ goods satisfy human wants through the final good i.e. indirectly and not directly.

Correct option is (D) Both (B) and (C)

Trade cycles are continuous phases of good and bad changes occurring in the economy.

Goods (i.e. activities) that cannot be touched and seen are known as services. Services neither have physical existence nor can be measured cardinally. Example: Services of education, medical consultancy, music, cooking, etc.

Goods that do not last long and can be consumed only once are known as perishable goods. Example: Milk, fruits, meat, etc.

The period when economic activity reaches the maximum growth level in a given time period is called the ‘Boom period’ or simply ‘Boom’.

When depression lasts for some time, the suppressed demand starts emerging. Government may also try to boost investments and employment through various strategies. Moreover, at times technological changes take place in the long run. All this improves the market situation and recovery of market takes place.

Goods which do not have exchange value are called non-economic goods. Such goods are abundant in supply. Example: Sunlight and air.

Phases of a trade cycle:
Trade cycle passes through four phases which are discussed below.
1. Boom:

• The period when economic activity reaches the maximum growth level in a given time period is called the ‘Boom period’ or simply ‘Boom’.
• In the Boom period, the demands of goods/services are at its peak and so do incomes and profits. Thus, this period is also called ‘peak’.

2. Recession:

• -> The period that comes after the ‘Boom’ is called ‘recession’.
• -> In a given time period, when economic activity reaches to its peak which in turn takes the investments and employment also to the peak i.e. the highest possible levels, a slowdown occurs. As a result, demand slows down and so do investment and unemployment and recession occur.

3. Depression:

• During the slowdown in the recession phase when all activities reach a ‘ minimum level, it leads to phase called ‘depression’.
• In this phase, the confidence of buyers, producers and investors in the economic activity is at its lowest.
  Formation of depression:
• During recession phase, consumers start believing and expecting that since prices are falling they will still fall. This stops them from buying and the demand further decreases. When the demand falls, the production and employment also falls. This leads to more reduction in the demand which then finally causes depression.

4. Recovery:
When depression lasts for some time, the suppressed demand starts emerging. Government may also try to boost investments and employment through various strategies. Moreover, at times technological changes take place in the long run. All this leads to a recovery of demand, employment and investment and the market starts getting normal.

1. Boom
2. Recession
3. Depression and
4. Recovery.

1. They show dynamic changes in the economy.
2. They show positive and negative changes taking place in the economy.

Goods which have an exchange value in the market are called economic goods. Example: All goods such as metal, sugar, electronics, books, etc.

Correct option is (A) Non-economic goods