In this conversation, Rajesh (Rahul’s father) enters the room. He is a professional chef in Hotel Ashoka. It is Sunday and he is at home. Sneha (Rahul’s mother) wants Rajesh to cook food at home.
Mother: Rajesh, you cook delicious food for others. We also want to taste the magic of your hands.
Father: Sure! I will prepare a new dish for you and Rahul today.
Raju: Wow! What is the name of that dish?
Father: Broccoli, baby corn, and colourful pasta salad.
Do you know what is the price of this dish in the hotel? It is ₹2,000.
Mother: Don’t worry Raju we are not going to pay anything to your dad for this.
Father: Yes, because I love you my sweet son.
Raju: So, you get money when you cook at your job, but you will not get any when you cook for your family at home?
Father: Yes, Raju! In the hotel, I work for money. Thus, all of my efforts are of economic nature. Therefore, it is an economic activity.
Raju: Okay! So, the activities that you do at home are not for money. Therefore, they become non-economic activities, right?
Father: You are absolutely right. Economic as well as non-economic activities are done in every country. The state or the country in which these activities take place is known as an economy.
Raju: Do you mean that India is an economy?
Father: Yes, my son. Every country is an economy.
Raju: So, I was just thinking about Hotel Ashoka…
Father: What were you thinking?
Raju: I was thinking that,
Father: My dear son, by saying this, you have actually explained what happens in an economy.
Raju: What happens in it?
Father: You have explained the meaning of economy. You have mentioned all the four economic activities, which are: (i) Investment, (ii) Production (of goods and services), (iii) Consumption, and (iv) Distribution (of income)
Raju: It means that any country where economic activities like investment, production, consumption, and distribution take place is known as an economy.
Raju: You know, I am so lucky that both you and mom agree with each other. (Mixed economy)
However, Sunny, my friend, says that his father does not listen to anyone at home. Everyone has to do what he says. (Centrally planned economy)
Exactly opposite is the case at my friend’s, Meena’s, home. Nobody in her family objects or interferes in anything and they are free to do whatever they want. (Free economy)
Father: Yes son, every home has its own situations and circumstances. Therefore, the system at every home may be different.
(1) Economic activities
Economic activities are those activities that are undertaken by a man to earn income, money, and wealth for his life. These activities include investment, production, distribution, and consumption of goods and services at all levels within the society. The country where these economic activities are undertaken is known as an economy.
Example: Workers work in a factory and get wages.
(2) Types of economy
Centrally planned economy
- It is the economic system where all the decisions are made by the government and not by the interaction between consumers and businesses.
- Market economy is a free economy in which the central problems are solved by the market forces of demand and supply.
- Mixed economy = Planned economy + Market economy.
- Central problems are not only taken on the basis of social considerations but also on the basis of economic considerations. Example: India and the US are mixed economies.
- It is also known as dual economy.
- Private Firms
- Factorial distribution of income
- The choice oftechnique
- The choice of product
- None of these
- Centrally planned economy
- Mixed Economy
- Market/Free economy
- Both (1) and (2)