NATURE AND PURPOSE OF BUSINESS

1) Characteristics of business activity
I) an economic activity
II) Production or procurement of goods and services
III) Sales or exchange of goods and services for the satisfaction of human needs
IV) Dealing in goods and services on a regular bases
V) Profit earning
VI) Uncertainty of returns
VII) Element of risk
2) Primary industries
Activities connected with the extraction and production of natural resources and re-production and development of living organisms
I) Extractive: drawing out products from nature
E.g.: farming, mining
ii) Genetic: breading plants and animal
3) Secondary industries: production of goods using material been extracted in primary industries
5) Tertiary industries: connected with providing support services to primary and secondary industries as well as activities related to trade
6) Trade refers to sale, transfer or exchange of goods.
7) Auxiliaries to trade are:
i) Transport and communication
ii) Banking and finances
iii) Insurance
iv)Warehouse
v) Advertising

9) Multiple objective of business
i) Market standings
ii) Innovation
iii) Productivity
iv) Earning profits
v) Workers performance and attitude

NOTES ON MICRO ECONOMICS
WHAT IS SCARCITY? WHAT DO YOU MEAN BY ABSOLUTE SCARCITY?WHY IS IT A PROBLEM,AND HOW DOES IT CAUSE PROBLEM OF CHOICE ?
SCARCITY IS A SITUATION WHERE IN THE RESOURSES AVAILABLE FOR THE SATISFACTION OF OUR WANTS ARE LESS THAN THE RESOURSES REQURIED FOR THE SATISFACTION OF OUR WANTS.
OR
SCARCITY IS A RELATIVE CONCEPT .IT IS ALWAYS STUDIED WITH REFRENCE TO OUR UNLIMITED WANTS WHILE THE MEANS OF RESOURSES OUR LIMITED.
IMPORTANTT NOTE:
SCARCITY CAUSES PRICE: Scarcity Causes Price, Grater the scarcity of a thing higher is its market price .Zero Scarcity would mean Zero Price.
WHY IS SCARCITY A PROBLEM?
Scarcity is a problem because Recourse is scarce in relation to our wants. It is also because resources have alternative uses.
Problem Of Scarcity Causes Problem of Choice:
As the resources are scarce and have alternative uses, the problem of Choice arises.
Problem of choice is also called/or is also known as the Problem of Allocation of resourses to Alternative uses.

Goal of India’s development plans

I) Economic system adopt by India after independence
1. There are three main types of economic systems:
i) Capitalist economy
ii) Socialist economy
iii) Mixed economy
2. Every economic system has to answer the following three questions:
i) What goods or services should be produced
ii) How should goods or services be produced. Whether they should be produced by labour intensive technique or capital intensive technique.
iii) For whom should the goods and services be produced.
3. Capitalist economy
* What? In this economic system, people produce goods that others demand in order to sell or exchange for a profit.
* How? The answer to the question how to produce depends on the relative factor prices.
* Whom? In this type of system goods are distributed on the basis of purchasing power.
4. Socialist economy
*What? In a socialist economy the government decides what goods are to be produced.
*how? Technique of production is also chosen by the government
* Whom? Distribution of goods is based on the need of the people not on the bases of purchasing power.
5. Mixed economy
* A mixed economy is a combination of capitalism and socialism wherein both private and public sector co-exist
*What? The private sector will produce what they can produce and the government will provide those essential goods which the private sector fails to provide

Indian economy on the eve of independence

1) The solo purpose of British colonial rule was to reduce India into a feeder economy for Britain’s rapidly growing industrial sector. as a result Indian economy at the time of independence was in a very bad shape.

(1)Low level of income and economic development during british rule

1) The Indian economy of the 18th century was primarily an agricultural economy. Agriculture was in a good shape and looking up. India was also know for its handicraft industries in the whole world.
2) The prominent handicraft industries which gave prime place to India in the world market were cotton and silk textile; metal industries; precious stone works; gold and silver jewellery; perfumery etc.
3) British government perused economic policies for the protection and promotion of economic interests of Britain’s rather than the development of the Indian economy
4) British government changed the whole structure of the Indian economy and transformed it into a supplier of raw materials and consumer of finished product of British industries
5) The growth of the aggregate real output (GDP) was less than 2% during the first half of the 20th century and growth of per capita income was just 0.5%

(2)Agricultural Sector
1) The main cause of the stagnation of agricultural sector were as follows:-
i) The new land tenure that was introduced by British rulers in India. This land tenure system had three forms: Zamindari, Mahalwari and Ryotwari system. This gave birth to two classes – the landlords and the landless cultivators. Especially under the zamindari system the zamindars used to exploit the cultivators to the maximum. They used to charge a very high rate of land revenue from the agriculturalists as a result the surplus left with the cultivators was insufficient even for their barest minimum sustenance.
ii) The British rulers did not give much of attention to increase irrigation facilities and technological up gradation in India.
iii) British rulers initiated commercialisation of agriculture in which they encouraged the production of cash crops. As a result Britisher transformed Indian agriculture into a raw material activity to England .As a result of reduction in the production of food crops and lack of proper policies the country had to suffer from frequent occurrence of famines.
iv) The partition of the country had also adversely affected the India’s agricultural production. It created a serious problem of shortage of raw material for jute mills of Calcutta and textile mills of Bombay and Ahmedabad.Also, rich food producing areas of the west Punjab and Sindh went to Pakistan which created food crises in the country.


(3) Industrial Sector
1)the prime motive behind the de-industrialisation by the colonial government in India was done
i) To get raw material from India at cheap rate and thus to reduce India into a mere exporter of raw material to the British industries
ii) To sell British manufactured goods in India at higher prices
2) Decline of the handicraft industries made the following impacts:
i) It created large scale unemployment in the country
ii) Unemployed craftsmen migrated from cities to villages. This increased the burden of population on villages and agriculture.
iii) Consumer demand in the Indian market could not be met by the supply of locally made goods. This encouraged the imports of goods made in Britain.
3) the credit of beginning of iron and steel industries in India during the British rule goes to Jamshedji Tata. Tata iron and steel company known as TISCO was incorporated in august 1907 and it established its first plant in Jamshedpur in Bihar. The plant started producing iron in 1912.
4) Two main drawbacks of the industrial sector during colonial rule were:-
i) The growth rate of the industrial sector and its contribution towards the GDP was very small.
ii) There was very limited area of operation of the public sector in the new industrial sector of the country Public sectors in those days remained confined to railways, power generation, communication, ports, and some other departmental undertaking.





4) Foreign Trade
1) Before the advent of British rule in India, India used to get gold , silver , and other precious stones.
2) A very significant feature of India’s foreign trade during colonial rule was the generation of a large surpluse. Export surplus implies that the countries total exports were greater than the imports. But this export surplus was disadvantageous to the country’s economy on the following bases:-
i) Because of more exports several commodities were not available in the domestic market to the comman consumer.
ii) This export surplus did not bring in gold or silver in the country. Rather this surplus was use to make payments for the expenses war fought by the Britain and to finance the deficit in invisible items like tourism, transport, insurance and banking services.

5) Demographic Condition
1) India was in the first stage of demographic transition till 1921. The first stage implies that there was high birth rate and high death rate in pre 1921 India. Since in this stage both birth rate and death rate were high, the growth of population remained slow. Because of very slow growth in population this period was termed as the period of stragnant population
2) The main reason for the slow rate of growth of population during the British rule were poverty, malnutrition, famines, epidemics and poor health facilities.
3) After 1921 India entered the second stage of demographic transaction. The average literacy rate was 16 % and woman literacy rate was only 7%. Infant morality rate was as high as 218 and life expectancy was as low as 32 years.

6) Occupational Structure
1)there are two important features of India’s occupational structure during the British period:-
i) 70% to 75% of India’s working population was involved with agricultural sector.10% were engaged with manufacturing sector and 15% to 20% were with service sector.
ii)Growing regional variation.



7) Infrastructure
1) The state of infrastructure facilities especially in the field of transport, communication and energy was very poor in India during the British rule in India. However some efforts were made to develop basic infrastructure like roads, railways, ports, water transport, and post by the Britishers
2) The British rulers introduced railways in 1850 and Indian railways begun operations in 1853.
3)The development and the construction of railways by the British rulers had affected the Indian economy in the following ways:-
i)It provided cheap and rapid transport system especially for distant travel.
ii)It broke geographical barriers and thus promoted national unity and understanding
iii)It created new employment opportunities
iv)It helped in controlling famines
v)It promoted foreign trade but benefited British more than Indians
vi)It encouraged the process of industrialisation
4) The main reason of British rulers behind the beginning of railways in India were as following:-
i) To have effective control and administration over the vast country. In view of this Britisher tried to link important administrative and military centres through railway.
ii) Earning profit