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  1. Chapter 4, Basic Economics Problem
  2. What is Basic Economic Problem? The economic problem – sometimes called the basic or central economic problem – asserts that an economy's finite resources are insufficient to satisfy all human wants and needs. It assumes that human wants are unlimited, but the means to satisfy human wants are limited.
  3. Main Economic Problem 1. Poverty 2. Unemployment 3. Inflation 3
  4. 1. Poverty Types of poverty: 1. Absolute poverty 2. Relative Poverty Poverty means the economic situation of the individual or social group in which they cannot satisfy a certain range of minimum requirement. 4
  5. Causes of Poverty 1. Heavy pressure of population 2. Unemployment and under employment 3. Capital Deficiency 4. Under-developed economy 5. Increase in Price 6. Rural Economy 7. Lack of Infrastructure 8. Low rate of growth
  6. “ 1. Population Control 2. Increase in Employment 3. Equal distribution of Income 4. Regional poverty 5. Fulfilment of minimum needs of the Poor 6. Stability in Price Level 7. Development of Agriculture 6 Measures to reduce poverty
  7. Unemployment According to A.C. Pigou “Unemployment means, all those who are willing to work are not able to find job”. “When a person is actively searching for employment, but unable to find the job, is called unemployed”
  8. “ 1. Casual (Day to Day Activity) 2. Seasonal 3. Technological 4. Residual or voluntary 5. Structural 6. General or Cyclical 7. Frictional (Few Days) 8 Types of Unemployment
  9. Causes of unemployment ➜ Caste System ➜ Slow Economic Growth ➜ Increase in Population ➜ Agriculture is a Seasonal Occupation ➜ Joint Family System ➜ Fall of Cottage and Small industries ➜ Less Savings and Investment ➜ Inadequate Irrigation Facilities ➜ Immobility of labour
  10. 10 ➜ Change in industrial technique ➜ Policy regarding seasonal unemployment ➜ Change in education system ➜ Expansion of Employment exchanges ➜ More assistance to self- employed people ➜ Full and more productive employment ➜ High rate of capital formation ➜ Population control How to Reduce Unemploym ent?
  11. Inflation “The word inflation in the broadest possible sense refers to any increase in the general price-level which is sustained and non-seasonal in character”- Peterson. According to Coulborn inflation can be defined as, “too much money chasing too few goods.”
  12. 1. Demand-pull inflation 2. Cost-push inflation 3. Pricing Power Inflation 4. Sectorial Inflation Types of inflation
  13. Causes of inflation 1. Increase in money supply 2. Deficit financing 3. Increase in government expenditure 4. Inadequate agricultural and industrial growth 5. Rise in administered prices 6. Rising import prices 7. Rising taxes
  14. 14 1. Monetary Measures 2. Fiscal Measures 3. Others Measures Remedies to control inflation
  15. 15 ➜ Credit Control ➜ Demonetization of Currency ➜ Issue of New Currency 1. Monetary Measures
  16. 16 ➜ Reduction in Unnecessary Expenditure ➜ Increase in Taxes ➜ Increase in Savings 2. Fiscal Measures
  17. 17 ➜ To Increase Production ➜ Rational Wage Policy ➜ Price Control 3. Other Measures
  18. Important questions: Q.1 What is poverty? Explain the types of poverty Q.2 Explain the causes of poverty. Q.3 Explain the measures of poverty. Q.4 What is Unemployment? Explain the types of unemployment. Q.5 Explain the causes of unemployment. Q.6 What is inflation? Explain the types of inflation. Q.7 Explain the causes and remedies of inflation. 18
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