Sectors of An Economy : RAS Economics
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Sectors of An Economy : RAS Economics

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Sectors of An Economy : RAS Economics

Economics is a behavioural, or social science. It is the study of how people make choices. It can be defined as the science of logically oriented or rational human beings. with unlimited wants, and limited resources

Sectors of An Economy : 

Primary Sector:

  • It includes all those activities which involves direct use of natural resources.
  • Ex. Agriculture, Forestry, Fishing, Fuels, Metals, Minerals, Mining etc.

Secondary Sector:

  • It is known as the manufacturing sector which uses the produce of the primary sector as its raw materials.
  • Since manufacturing is done by industries, it is also known as the industrial sector.
  • Ex. Cakes, Bread and Biscuits, Automobiles, Textiles etc.

Tertiary Sector:

  • It is also known as the Services sector.
  • It includes all those economic activities where different ‘services’ are produced.
  • Ex. Education, Banking, Insurance, Transportation, Tourism etc.

Sectors of An Economy : RAS Economics

Organsing An Economy :

Capitalistic Economy:

  • It is an economic system in which investment in and ownership of the means of production, distribution and exchange of wealth is made and maintained mainly by private individuals or corporations.
  • It is also known as Laissez-Faire economy.

Socialistic Economy:

  • It is an economic system in which the means of production (property and assets) are held in common and not individually. Common ownership means individuals having authority take decisions in the name of collective group.
Basis of Difference Capitalistic Economy Socialist Economy
Ownership of resources Privately owned State owned
Foundation belief Competition brings out the best in people Cooperation is the best way for people to coexist
Earning wealth Everyone works for his own wealth Everyone works for wealth which is distributed equally to everyone
Market scenario Level playing field Protection to PSUs, Private enterprises permitted in few businesses.
Government Interference Only in situations where laws have been broken Fully involved
Employees motivation Highly motivated on account of proportional benefits Rarely motivated as performance in not rewarded
Merit Better economic growth because of competition Equal distribution of income results in welfare of all
Demerit Few individuals attain power Hard work is not rewarded. Lazy employees also entitled to equal level of benefits

Mixed Economy:

  • It is an economy in which private corporate enterprises and public sector enterprises exist side-by-side, and decisions taken through market mechanism are supplemented by some form of partial planning.
  • India has opted for mixed economy.

Features of Mixed Economy:

  • Coexistence of both public sector and private sector.
  • Market forces are present but are closely monitored by the government.
  • Monopolies may be existing but under close supervision of the government

Advantages of Mixed Economy:

  • Producers and consumers have freedom to choose what to produce and what to consume but production and consumption of harmful goods and services may be stopped by the government.
  • It may have less income inequalities because of the role of the government.
  • It represents an achievable balance between individual initiative and social goals.

Factors of Production :

  • ‘Factors of production’ is an economic term used to describe the inputs that are used in the production of goods and services in the attempt to make an economic profit.
  • 4 Factors of Production are :
    • Land
    • Labour
    • Capital
    • Entrepreneurship 

Factors of Production And Their Factors Rewards

Sectors of An Economy : RAS Economics

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Read Introduction to Economics