Agro-Finance Lecture-3 some fundamental terms of economics
Download 27.26 Kb.
|
- Navigate this page:
- Total Utility
- Classification of wealth
- Capital
- Characteristics of capital
- Types of capital : Inherited or parental or own capital Credited (Capital burrowed on loan is credit) Importance of capital
- Classification of capital
- Difference between wealth and capital
- Different types of Income
- Farmstead
Marginal Utility: Additional utility to a consumer from an additional unit of an economic goods.
Total Utility: Total utility is maximum when marginal utility is zero. Wealth: These are those tangible and intangible things which have exchange value and can satisfy human needs. Its supply is less but demand is more. It has to be acquired by human efforts or sacrifice, e.g. land, building, diamond, gold, silver etc. Some important characteristics of wealth are: Utility: It has got utility Scarcity: Supply is less than demand, e.g. Sand on sea beach is not wealth but sand in urban shops is wealth. Transferability: Wealth can be transferred from one person/place to other. Classification of wealth: There are four types of wealth: Personal—House Jewellery, car etc Social—Park, road, bridge etc National—All wealth of citizens, all public wealth, all natural resources, all balance of credit-debit etc. International wealth: Sum total of all National wealth of all the countries and also common international wealth Capital: Capital is that part of human wealth which is used for generating income. Qualities of capital (inherent qualities or persistent points): Money is capital Only human wealth is capital—not natural ones It depends on use: Rice seeds used for sowing is capital but when used as food then it is not capital Characteristics of capital: Capital is not always essential factor of production (doll from clod) It is a man made factor of production Capital may get devaluated in time In production system capital is a very dynamic factor Capital is a passive factor Capital is flexible—may be increased or decreased Types of capital: Inherited or parental or own capital Credited (Capital burrowed on loan is credit) Importance of capital: Capital is required for large scale production Capital is required for modern agriculture Capital is required for economic development of country Capital is required for raising living standard Capital is required for inventions and discoveries Capital is required for transportation and communication Capital is required for many other purposes Functions of capital: Reduce cost of production Purchase raw materials Payment of wages Management of credits Purchase of other materials Classification of capital Personal or social Indigenous or Foreign National or international Sunken (worked) or floating (working) Physical (materialistic capital) or individual (also known as human capital: personal traits: skill, creativity) Fixed or variable: Fixed capital is stock of tangible and durable fixed assets used for more than one year before salvage: plant, machinery, vehicle, equipment, value of land, building. Variable capital – its value changes during production period, e.g. labour cost Capital for consumption or production: Consumption increases efficiency of farmers. Production: Directly produce things, e.g. seed, fertilizer. Difference between wealth and capital: Only wealth which brings income is capital. All capitals are wealth but all wealth are not capital. Income: Every human being works to live. In lieu of this work he/she gets some money/material/services (say, medical treatment, swimming pool facilities) which is called income. Doctor gets money. Military man gets money+ food+ services. It is expressed in terms of money etc for a limited time; say, one week, month, year etc. Different types of Income: Rent—obtained by land lord, Jamindar, owners Wages—obtained by workers (physical) Interest---obtained by creditors and capitalists Salary---obtained by managers, officers etc Profit—obtained by entrepreneurs, businessmen, industrialists etc Value: It is exchange value of one thing compared to other. It is a relative term and expressed as the relationship of two things at a particular place and time. It is an externally imposed characteristics like utility, e.g. one camel has value of two oxen; sunlight has got utility but no exchange value (definition will change if we can store and sell sunlight). NOTE: Main characteristic of value is scarcity and utility which is of second importance. Price: Value of commodity expressed in terms of money is called price, e.g. 1 Kg rice = Rs15/-, it may be expressed in any type of currency like, rupee, dollar, pound, dinar, Renminbi (RMB) etc. Farm: A piece of land under single management for agricultural purposes. A tract of land rented or leased or own used for cultivation, pastures etc along with a house and other necessary building. (Pond is ultimately land only). Farmstead: A piece of land or water used for breeding animal. Firm: Business house works for profit ----END--- Download 27.26 Kb. Share with your friends:
|