P.N.

Dandeniya
QS Level 05
GENERAL ECONOMICS
Batch: - 2023/01 (F45C002M11)
Assignment

Answer all questions

i. Briefly explain Economics in your own words

ii. Explain the contribution of privet sector to words the development of the construction
industry in Sri Lanka

iii. Briefly explain Economics concept.

iv. What are the economic resources?

v. What are the unit characteristic of construction industry

vi. What are the types in construction industry?

vii. Explain the contribution of construction industry on the national economy in Sri Lanka as
per the 2022 Centre bank annual report

viii. State the main feature of human needs

ix. Explain Microeconomics and Macroeconomics in your own words

x. Explain Positive statement & Normative statement in your own words with suitable
example

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Answers

01. Briefly explain Economics in your own words

Economy is a social science that studies production, distribution and consumption of goods and service.
It focuses on the concept of scarcity of resources and its implication for the use of resources. It study of
how individuals and group of people strive their neds and wants by making choices.

In the study of economy we need to understand basic economic questions.

What should be produces?
Deciding to use a resource for one purpose means giving up the opportunity to use it for something
else.
This is the opportunity cost.

How should it be produces?

Methods and labor used as well as the quality of the items produced.

Who should share in what is produces?

In most societies people can have as many goods and services as they can afford to buy
The amount of income they receive determine how many goods and service they can have.

Various economists have defined economics in different ways. Adam Smith , Alfred Marshel, Lionel
Robinson are some of them.

• Adam Smith defines economics as studying wealth in his book “The Wealth of Nation”.
• Alfres Marshel has defined economics is the study of human behaviors in day to day activities.
• Lionel Robinson defines economics of the studies of human behaviors in the basic of the
relationship between the scarcities of resources.

02. Explain the contribution of privet sector to words the development of the construction
industry in Sri Lanka.
The construction industry is one of a major sector that contributes to the development of the Sri Lankan
economy. The economic reforms took place after 1977 are considered as a turning point of construction
industry in Sri Lanka. Use of latest machinery, new materials in construction, new technology and
foreign and local investment in the construction sector by the private sector, setting proper standards are
some of the positive features which can be seen in construction sector.

According to the estimate made in 2015, 680,000 people have been working in the construction sector.
Number of private sector companies registered in the construction sector has exceeded 2500. Some of
the private companies engage in construction sector are MAGA,Tudawe, Sierra.

Maga engineering company, which was started in 1984 is a major private company in construction
sector in Sri Lanka.The company has more than 12,000 employees. The company engaged in
construction of buildings, highways, water supply projects, hotels, apartments, etc. The breakwater in
Maldives was built by this Sri Lankan company in 1990.

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The value added in construction activities grew by 4.3 percent in 2017. But in 2018, it went down by 2
percent. This is revealed in the 2018 Central Bank of Sri Lanka reports. The reports also say that the
decline in large-scale construction activities and infrastructure development projects in 2018 has led to
this situation.

The construction industry contributes 6.9% of GDP in 2020 from the previous year contribution of 7.4%
employing around 600,000 workers.

The Colombo district land valuation indicator compiled by the Central Bank of Sri Lanka recorded an
overall 6.8% growth rate in first half of 2021.

Due to socio-economic crisis in 2020/23 significant development can not be seen in construction
sector. As a result of which several infrastructure projects are under development. For example Port
City project, which has been invested huge amount of local and foreign investments, is under
development.

Conclusion: Sri Lanka is a developing country for more than 75 years. To overcome this economic
crisis of the country it is necessary to identify long term planning in our economy coupled with firm
policies almost all the sectors in the economy. Policy makers should make policies which are not
changing by the manifesto of political parties. It is also necessary to consider the fact those residential
areas, industrial areas, agricultural lands are properly planned according to a national physical plan
hence minimizing the cost for development of infrastructure. This concept should thorley consider
policy makers when making policies. So all of the citizens have national responsibility to make this
island as a developing country in the world.

03. Briefly explain Economics concept.

Needs , wants and non-economic goods

Needs : basic necessities need to certain human life are called needs. ex : food, shelter, clothes , dense
of feeling safe, financial security, health and well being safety against accident or illness.

Wants: various forms of fulfilling are called wants. Wants can be classified as material wants and non-
material wants. In economy only the material wants are considered. Material wants can be fulfilled
through the consumption of goods and services. ex: TV, magazine, boat, new jewelry.

Non-economic goods: goods with unlimited supply at zero price are called non-economic goods. Ex:
water, sunlight

04. What are the economic resources?

Resources with limited supply against unlimited wants of a society and scarcity in nature are called
economic resources. There are four types of economic resources : natural, labor, apital and
entrepreneurship.

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Natural: raw materials from the nature that are used to produce goods. ex: trees, water, rains, cattle,
coal
Material or substances from the earth such as oil, coal, natural gas and fertile land.
Renewable resources can be reproduced ex: wheat , cattle, solar energy,fish,teees,rivers, wind power
Non renewable resources limited ex: coal, iron, oil, minerals (gold, copper, tin)

Labor: human activity that provides the services or goods in an economy

People who make the goods and services for which they are paid.

Labor can be skilled or unskilled, physical or intellectual.

Quality and quantity of labor

Quantity of labor refers to how many workers are available (or how many hours are available). The
quantity of labor in a country would be increased by a rise in the retirement age or an increase in
immigration.

Quality of work refers to productivity of a worker. The quality of labor is improved by training and
education.

The productivity of a worker refers to how much output per hour a worker produces. Productivity is
increased by human capital (education, training), physical capital, technology.

The mobility of labor

Geographical mobility, occupational mobility- the ability of labor to move freely from one job to
another.

Labor mobility are limited by people’s socialities, lack of information about jobs far away, difference in
the price and availability of housing in different locations, governmental restrictions such as visas, lack
of skills/ education/ training.

As a nation we are facing brain drain for long period of time and it has been noticeably increased
during the last years up to recent past due to socio-economic crisis in the country. The concept “brain
drain” is the emigration of many of the most highly educated workers to rich countiries.So the migrant
workers with valued education can often earn far greater income by moving to rich countries.

Capital: wealth in the form of money or other assets owned by a person or organization. The capital
can be further divided into physical capital , working capital and fixed capital.

Examples of physical capital: factories, offices, warehouses, railways, machines, power stations, lorries,
processed raw materials, hospitals, schools, roads, airports, seaports, bridges

Working capital refers to stocks of finished and semi-finished goods that will be either consumed in the
near future or will be make into finished consumer goods.

Fixed capital will not be made into other goods or sold.Examples are factories, offices, machines.

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Some capital goods are physically mobile (such as lorries, but others like power plants are not. Some
capital goods are occupationally mobile (they can be used for the production of many goods [an office
or photocopy machine], but others are not [construction cranes]

The quality and quantity of capital :

These are both increased by investment

The quality of capital goods is improved by advances in technology

The opportunity cost of investment is that you must have less consumer goods.

Entrepreneurship: the capacity of an individual or group who want to provide a particular good or
service to the market. Entrepreneurs will usually invest their own money in a business and take on the
risk associated with a business.

The Entrepreneurs organizes the other factors of production in ways that benefit other people.

In return for having innovative business ideas and taking the risk in putting funds into a business the
entrepreneur takes any money that the business has left after the other factors of production have
received their rewards.

The key functions of the entrepreneurs are to bear risk and organize other economic resources.

05. What are the unit characteristic of construction industry

The final product is large, heavy, expensive, and spread over a large geographical area.

The product is made especially to the requirement of each individual customer.

Design is spread from construction

Production takes place on site itself.

Affected by the external environment.

Price of the product is determined in advance.

Projects: large, complex, high cost, time consuming

Diverse skills, equipment and technologies are using in this industry.

Large industry but fragmented

Complexity: construction projects today are high-tech, highly mechanized and complex. A typical
construction project os characterized by the consumption of numerous types of material, variety of
tools, equipment, plans and machinery working in tandem, several different contractiong agencies, big
and small, sub-contractors, participating with complex interactions, working in cooperation, sometimes
even at cross purposes.

In addition to this highly interactive and complex environment at a construction site, thousands of
activities each of different nature are arranged simultaneously.

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Thus the construction project is much more complex than any other production process, manufacturing,
or service industry.

Multiplicity of agencies: another typical characteristic of the construction industry is the presence of
multiple regulatory agencies controlling the construction site. Every one of these regulatory agencies is
independent of others.

Many government agencies and semi-government agencies like municipal councils, urban councils,
urban and rural planning, forest department, central environmental authority, district /divisional
secretariat offices, environmental organizations, NGOs, public community and other public departments
controlling various aspects of construction at each project site.

Involvement of several people on ad-hoc basis.

Limited set of resources

High cost

A time frame for the completion high risk of failure

No practice or rehearsal to test

High level of sub-contraction

Uncertainty exist. To overcome uncertainty contingency planes are prepared.

Construction industry is composed by an integration of various stakeholders.

Example of stakeholders : clients, contractors, consultants, plant helpers, research & development
organizations, regulatory bodies, financial institutions, environmental organizations, insurances
companies, skill development institutions, material suppliers & manufacturers.

INPUT PROCESS OUTPUT

land,materials (such cement, sand, Buildings, roads & highways, ports,

bricks, steel), equipment, airports, tunnels, bridges, dams,
manpower, capital/finance, irrigation networks, power plants
organization

06. What are the types in construction industry?

Construction industry is divided into two types. They are non-residential constructions and residential
constructions.

The non-residential sector is further divided into three categories as follows.

i. Heavy industrial
ii. Institutional and commercial
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 iii. Engineering
The residential construction is a process that involves the expansion, renovation, or construction of a
new home or spaces intended to be occupied for residential purposes. Residential construction can be a
complex process with a lot of phases and stakeholders involved.

07. Explain the contribution of construction industry on the national economy in Sri Lanka as per the
2022 Centre bank annual report

The construction industry plays an important role in the economy of Sri Lanka. Any changes in the
economy may affect also other sectors, including the construction sector, and vice versa. When the
construction sector works at maximum capacity, a huge amount of labor force is active. The
development of the construction industry and economy depend also on the related regulations. The
actual situation within the construction industry of Sri Lanka and policies related to the construction
industry are important for the economic development of the country. The construction industry covers a
large diversity of activities, operations and sectors, such as construction of buildings, roads, railways,
repairs, other related construction works.

The Construction industry contributes 60.5% of GDP in 2022 and 3.6% increase compared to the
previous year.

08. State the main feature of human needs

Each individual has unique characteristics, but certain needs are common to all people. A need is
something that is desirable, useful or necessary. Human needs are physiological and psychological
conditions that an individual must meet to achieve a state of health or well-being.

Physiologic needs:- oxygen, fluids, nutrition, body temperature, rest and sleep, sex

Safety and security :- physical safety, psychological safety, the need for shelter and freedom from harm
and danger

Love and belonging :- the need to love, the need to care, the need to affection, the need to establish
fruitful and meaningful relationship.
Self-esteem needs :- self- worth, self-identity, self respect, body image

Self actualization needs :- the need to learn/ create and understand, the need for harmonious
relationships, the need for beauty, the need for spiritual fulfillment.

Characteristics of basic human needs

• Needs are universal.
• Needs may be met in different ways.
• Needs may be stimulated by external and internal factor.
• Needs are interrelated.
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09. Explain Micro economics and Macro economics in your own words
Economy is mainly divided into two categories known as micro economics and macro economics.

Macro economics is concerned with the study of the behavior of consumers, firms and the
determination of market price and quantities, transaction factors which affect goods and services in a
society and employment opportunities in a country.

Micro economic investigate how scarcity resources are allocated among alternatives.

Importance of microeconomy

Optimal production decision,p roper employment of resources, helpful in setting price, understanding
the satisfaction, formulation of policies, promotes international trade

Examples for microeconomic:

Production cost of firm, market operation of each goods, consumer behavior of the market, price of
bread, etc.

10. Explain Positive statement & Normative statement in your own words with suitable example
Positive statement concerns what” is” (present situation), “was” (past situation) and “will be” (future
situation). These statements are based on factual observations.

Ex: average temperature in Bandarawela town in July is 22 Celsius.

Gross domestic product (GDP) in Sri Lanka increased to 9.4 billion USD in the first quarter of 2023.

Normative statements are statements that involve value judgment or express personal opinions about
what should be. These statements are not based on factual observations or evidence.

Ex: Higher education should be free for all students.

The government should increase taxes on tobacco products in order to reduce smoking.

Reference: - lecture notes, internet (Wikipedia, https://www.tutor2u.net/, Central Bank Report- 2022,
https://www2.econ.iastate.edu/, outlier.org, slideplayer