Mechanical Department Semester : 4Prepared By :- Name Enrolment No Harshil Jani 130280119037 Krunal Mamtora 130280119042 Kunj Panchal 130280119052 Parag Parekh 130280119056 Harsh Patel 130280119068 Jay Patel 130280119070 Preyash Panchal 130280119053

Engineering Economics And Management

Basic Economics’ Problems

• Introduction• Types of Economics’ Problems• Meaning & remedies of listed types

Problems related to economy are termed as “Economic problem”.

• Economic problem is an integration of four parts: 1. Problem of allocation of resources2. Problem of full- utilization of resources3. Problem of economical efficiency 4. Problem of economical growth

Introduction

Different types of Basic economics problems are as follow :1. Poverty 2. Unemployment3. Inflation

• As per the United Nations, “Poverty is fundamentally a denial of choices and opportunities, and a violation of human dignity. It means lack of basic capacity to participate effectively in society. It means not having enough to feed and clothe a family, not having a school or clinic to go to, not having the land on which to grow one’s food or a job to earn one’s living, not having access to credit. It means insecurity, powerlessness and exclusion of individuals, households and communities. It means susceptibility to violence, and it often implies living on marginal or fragile environments, without access to clean water or sanitation”.

• Poverty is general scarcity or death ,or the state of one who lacks a certain amount of material possessions or money.

Poverty

• To measure the poverty , a central indicator in income and consumption is defined , which is known as the poverty line.

• It is critical value below which an individual or household is determined to the poor.

• In India, the Minimum Calories intake of a Person has been put at 2,400 in Rural Area & 2,100 in Urban Areas.

• To convert this Calorie intake based Poverty Line into a Monetary Measure of Poverty, the Cost of Minimum Consumption Requirements of Food providing the minimum calories is calculated at prevailing Price.

• Thus, Government defined a Person with an Income of Less than Rs.368 (Rural) & Rs.559 (Urban) per month as living below Poverty Line.

Poverty line

• Almost half of the world – over 3 billion people – live on less than $2.50 a day.

• According to UNICEF, 22,000 children die each day due to poverty.

• Nearly a billion people entered the 21st century unable to read a book or sign their names.

• Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen.

Statistical Facts on Poverty

Relative Poverty• Refers to the Income or Asset

Position of one Class or Group of People in comparison with the other Classes or Groups, or of one Individual vis a vis ‐ ‐the Others.

• The essential point here is that Poverty of One is Relative to the Richness of the other.

• For Example, an Average Middle Class Person is Poor when compared to the Upper Middle Class Person, who in turn, may be poorer than the Richer Person and so on.

Absolute Poverty• Absolute poverty refers to a

condition where a person does not have the minimum amount of income needed to meet the minimum requirements for one or more basic living needs over an extended period of time.

• It not only depends on income but also depends on services which are needed.

• For Example , People below poverty line are facing absolute poverty and do not have enough money to buy which is needed for survival.

1. Unemployment2. Corruption3. High population growth4. Inflation5. Land inequality and social justice6. Less priority to agriculture sector by Government7. Neglecting the poor once8. Lack of decent housing9. Health among the main cause of poverty in India

Causes of Poverty

1. Employment opportunities2. Uplift of agriculture3. Education4. Establishment of Small Scale Industries5. Reduce Inflation6. Proper Utilization Of Resources7. Check Population Growth

Measures to Reduce Poverty

Unemployment• When a person is actively searching for a job, but

unable to find the job, is called unemployment.• It is often used as a measure of health of the

economy.• Unemployment rate is the number of

unemployed person divided by number of people in labor force.

• Unemployment is very serious problem to society which increases the poverty in the country.

Types of Unemployment1. Casual Unemployment: Based on greater

availability of workers than there are jobs for workers.

2. Disguised Unemployment: This occurs when when more than the necessary number of people are employed for specific work.

3. Seasonal Unemployment: Season related, agriculture workers mostly.

4. Voluntary Unemployment: People who are unwilling to work and get continuous flow of income are voluntarily unemployed.

Causes of Unemployment

1. Illiteracy2. Technology3. Population Growth4. Social and Cultural Factors

Remedies to Unemployment

1. Reform in The Education System2. Population Control3. Self-Employment Schemes4. Policy Towards Seasonal Unemployment5. Rapid Indusrtialization

Inflation• It is a sustained increase in the general price level of

goods and services in an economy over a period of time.

• Inflation occurs due to an imbalance between demand and supply of money, changes in products and distribution costs or increase in taxes on products.

• Price-inflation is measured by inflation rate which is calculated year on year bases.

Types of Inflation1. Demand-pull (or excess demand inflation)2. Cost-push inflation3. Pricing power inflation4. Sectorial inflation

Causes of Inflation1. Unfavorable agricultural production2. Hoarding3. Deficit financing4. Population and black money5. Upward revision of admistered prices6. Increase in indirect taxes7. Increase in wage rates

Remedies of Inflation1. Monetary measures

Higher bank rate Sale of government securities in open market Increase in reserve requirements Selective credit control measures

2. Fiscal measures Reduction in government spending Increase in tax rates Increase in public borrowings

3. Other measures