Nf ECONOMICS ECONOMIC PROBLEM. The economic problem — sometimes called basic or central economic problem ~ ficient to satisfy all finite resources are in: asserts thal an economy human wants and needs I assumes that human wants are unlimited, bul the means 1¢ limited. The economic problem is the problem of rational to satisfy human wi management of resources or the problem of optimum utilization of resources It arises because resources are scarce and resources have altermative uses Three questions arise from this: + What to produce? + How to produce? & + For whom to produce? + What to produce? ‘What and how much will you produce?’ This question lies with selecting the type of supply and the quantity of the supply, focusing on efficiency. €.9. "What should | produce more; laptops or tablets?” +. How to produce? Capital goods or consumer goods "How do you produce this?’ This question deals with the assets and procedures used while making the product, also focusing on efficiency. e.g. "Should | hire more workers, or do | invest in more machinery?” + For whom to produce? “To v-hom and how will you distribute the goods?’ and 'For whom will you produce: this for?’ arises from this question. This question deals with distributing goods that have been produced, focusing on efficiency and equity €g. "Do! give more dividends to stock holders, or do | increase worker wages?” Scarcity : is the fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs: Payrtunity cost Abenelit profit, or value of something that must be given up to acquire or achieve: @, Since every 1esource (land, money, time, ele ) can be pul to 46, evary action, choice, or dec ociated opportunity something alleriative cost, spend time and money going to i movie, you caro spenedthat send the money orsomething else For example, you time at home reading a book, and you cat Scanned with CamSca1. nity cost. Facts about opportunity Ha coals final *Oppurtunity costs are not restricted to monetary oF fl * The real cost of output forgone. * Lost time * Pleasure or any other benefit that provides utility should also be considered opportunity costs. * This was developed by John Stuart Mill. * Oppurtunity cost is indicated on a Production Possibility Frontier. What is Production Possibility Frontie? Production Possibility Frontier: Is a graph that shows the maximum amount a producer can manufacture keeping in mind the given resources that are limited Scanned with CamScaTAXATION. What is Taxation? impoaaen isa ‘erm for when a taxing authority, usually a government, levies or ees © term "taxation" applies to all types of involuntary levies, from income to : Bains to estate taxes Though taxation can be a noun or verb, it is usually referred to as ‘an act; the resulting revenue is usually called "taxes." The money collected for taxes is used for: *To pay people who work for the government. E.g. Municipal sweepers, doctors in Government hospitals, teachers of Government schools, soldiers, firemen, etc. * To provide facilities E.g. Making a new road or bridge connecting places, putting water connections in homes that didn’t have them, making canals that give water to fields. *To give poor people grains and provisions at discounted rates( the government pays the seller part of the money so that the poor are charged less). *To provide services such as trains, buses etc. TYPES OF TAXES x Income Tax: Income tax.refers to annual taxes levied by the federal government and most state governments on individual and business income. By law, businesses and individuals must file federal and state income tax returns every year to determine whether they owe taxes. Governments use the taxes they collect to fund their activities. Service Tax: Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994. Sales Tax or VAT: percentage of revenue imposed on the Sales tax, as compared to VAT is the S tax is levied on the total value of retail sale of goods. Unlike VAT, sale: goods and services purchased. Toll Tax: f Scanned with CamScaA tax or fee paid for some liberty or privilege (as of passing over a highway or bridge) Entertainment Tax: Entertainment Tax is a tax imposed by the government on feature films getting a wide release in the country and are reduced from gross collections, major commercial shows. GST: : The goods and services tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. The GST is paid by consumers, but itis remitted to the government by the businesses selling the goods and services. In effect, GST provides revenue for the government. Scanned with CamSca