Consumer Behavior Theory: It studies how a consumer allocates his income to

various uses so that he can get maximum satisfaction.

Productive Behavior Theory: It studies how the producer decides which
commodity he wants to produce and how much to produce so that his profit
can be maximized.
Price Theory: 'Price Theory' is the most important component of
microeconomics. Price theory studies how the price of a commodity is
determined in the market.
Important Components of Macroeconomics
• Fiscal Policies and Monetary Policies • Government Budget • Money Supply
and Credit Creation 1. Theories relating to Inflation and Deflationary Gap in the
Economy • Exchange Rate and Balance of Payments • Employment Theory •
Principles relating to Aggregate Demand and Aggregate Supply i.e. Balanced
Production
Reasoning behind adopting mixed economy in India
Lack of capital and resources with the state/government:
To take advantage of the capital, technology and management available with
the private sector;
To reduce the burden of the state / public sector, so that it can develop the
infrastructural structure and conduct programs of social welfare as per the
requirement.
Access to quality essential goods and services to citizens to ensure;
To accelerate the pace of economic development;
To solve the problem of poverty and unemployment;
To make the Indian economy globally competitive.
Classification of economies on the basis of role of different sectors
Agricultural economy - If the contribution of the primary sector i.e. agriculture
and allied sector in the GDP of an economy is 50 percent or more and about
the same proportion of people depend on agriculture and allied sectors for
livelihood, then it is called 'agricultural economy'. At the time of
independence, India was an agrarian economy country.
Industrial economy - If the share of the secondary sector in the GDP of an
economy is 50 percent or more and in the same proportion there is a
dependence on this sector for the livelihood of the people, then that economy
can be called 'industrial economy', Like- China.
Service economy - If the share of the tertiary sector in the GDP of an economy
is 50 percent or more and in the same proportion there is a dependence on
this sector for the livelihood of the people, then that economy can be called
'service economy'. , such as America, Britain, Japan.
Classification of economies on the basis of planning
planned economy
Planned economy refers to such economies, which make a comprehensive plan
and strategies to achieve the goals of economic growth and development. In
such economies, goals are first set, then strategies are formulated to achieve
them. The Five Year Plans prepared by the first Planning Commission in India
and the 15 Year Vision, 7 Year Strategy and 3 Year Action Agenda prepared by
the present NITI Aayog are good examples of the planned nature of the Indian
economy. Unplanned Economy: Non-planned economy refers to the
economies which do not accept the concept of planning. In such economies,
what economic growth and development goals are to be achieved in a given
period is not predetermined. There is a lack of strategies related to economic
development in these types of economies.
Classification of economies on the basis of dependency
Self-reliant economy Self-reliant economies are those economies, which are
capable of producing goods and services according to their needs. These
economies have sufficient capital and resources available. These economies
are able to meet almost all the needs of their citizens. Note: It is now generally
believed in the economic world that no country in today's world can call itself a
completely self-sufficient economy.
Dependent Economy - The economies which are dependent on other
economies for the fulfillment of their needs are called 'dependent economies'.
These economies are generally found lacking in capital and resources. These
economies also generally lack advanced technology of production.
Interdependent Economy – The economies which are self-sufficient in some
matters and areas and are also dependent on other countries in some respects
and areas, such economies are called interdependent economies. For example,
resources are abundant in some countries, but there is a lack of advanced
technology. In such a situation, those countries depend on other countries for
technology to make efficient use of their resources. Similarly, industry and
service sector is highly developed in a country, while that country is dependent
on other countries for agricultural products.
Economic Structure- National Income of any country is a monetary measure of
the quantity of final goods and services produced in a particular period which
is determined from GDP. The composition of national income is evident from
the contribution of sectors related to various economic activities. Therefore,
the contribution of various sectors to the GDP or national income is called the
economic structure of national income. For example, the economic structure
of India is made up of contributions from activities related to the primary
sector, secondary sector and tertiary sector.
Structural Changes- The difference in the contribution of different sectors to
the economic system and national income over time remains visible.
Therefore, the expected changes in the contribution of different sectors to the
national income are called structural changes.
Classification of World's Economies - Every year in July, the World Bank
classifies the world's economies, based on the gross national income per
capita. The World Bank has upgraded India from a developing country to a
category of lower middle income countries. According to the latest
classification, countries with an average per capita gross national income of
less than $1045 are classified as low-income countries. The same countries
whose income is between $ 1046 to $ 4125 have been termed as lower middle
income countries.
Different categories of goods-
Public Goods - All such goods and services which are provided or made
available to the people by the government through budgetary system and
which are used collectively, that is, increase in consumption of one does not
decrease the consumption of others, are called pure public goods. Such as- air
private goods- Such goods and services are called private goods which are
available by the market and whose collective consumption is not possible. Any
person who does not have the means to buy can be deprived of the use of
such goods. An increase in the consumption of these goods may reduce their
availability for other people.
Mixed Goods- Such goods which are neither purely public nor purely private
but have the characteristics of both, are called mixed goods.
Merit Goods- Such personal goods are called merit goods which are so
necessary and important for a particular class or any part of the community
that they have to be arranged for that particular class by the government
through budgetary channels. For example, arranging education, medical
housing scheme, etc., for the poor class, is an example of merit items.
Local Goods - Such public goods from which the profit arising out of which the
local people get the benefit are called local goods. Like the pond located inside
the village.
White goods - Those items of household use by the high income group which
are fast machines and which are difficult to operate and are kept in a
permanent place like refrigerator, washing machine etc. are called white
goods.
Orange articles- Such articles which can be replaced after a certain period of
time are called orange articles. like clothes etc.
Red Commodities - The commodities which are fast convertible and provide
low profit margin are called red goods. such as food products.
Yellow Goods- Such products which have high profit margin and are replaced
after a long period of time are called yellow goods.
Brown Goods- Audio visual products like radio, stereo television etc. are called
brown goods
Giffen Goods - A commodity whose demand increases when its price rises and
a decrease in its price decreases, is called Giffin Goods. This commodity is
consumed by the very low income group of the society. Therefore, when the
price of a Giffen commodity rises, it increases its demand by reducing its
consumption of other goods. Generally, the increase in the prices of these
occurs at the time of calamities.
Inferior Goods- Such goods which have an inverse relationship between
demand and income of the consumer are called inferior goods. The demand
for such a commodity decreases even when the income of the consumer
increases, the reason for this unfavorable relationship is that closely substitute
and superior quality goods of the subject goods are available in the market.
When income increases, the consumer will often want to buy better quality
goods to satisfy the need.
Substitute Goods- These are those goods which can be used in place of each
other. Like tea and coffee, sugar and jaggery. An increase in the price of one
commodity has a positive or negative effect on the demand for another
commodity.
Complementary Goods- When two or more goods have to be demanded to
satisfy a need, then they are called complementary goods like car and petrol,
butter and bread, pen and ink etc.
Basic features of Indian economy-
Considering India as one of the developing countries of the world, it is very
important to understand its basic features. Its main features are-
Low level of per capita income- The level of per capita income in India is very
low. According to the 2016 Global Human Development Report, the per capita
income in the year 2015 was only $ 5663.
Occupational Structure- India's business structure is primary productive. About
46% of the total employment is engaged in agriculture and allied work and the
contribution of agriculture to the national income is 17.2% according to the
new series 2011-12, which is much larger than the developed countries.
Whereas in agriculture per capita productivity is found low.
Unemployment and under-employment – Labor is an abundant element in
India. As a result, it is very difficult to provide gainful employment to the entire
executive population. Unemployment in developed countries is cyclical in
nature and unemployment arises only in the absence of efficient demand. In
countries like India, the nature of unemployment is structural and the main
reason for this is the lack of capital.
Low level human capital – An important feature of the Indian economy is its
low level of human capital type. This is the reason why the United Nations
Development Program has ranked global countries on the basis of Human
Development Index. India's HDR on the basis of the index was 131st in 2016
Lack of capital - Another root cause of economic growth of the Indian economy
is lack of capital which manifests in two forms. First the amount of capital
available per capita and second the prevailing low rate of capital formation.
According to the Economic Survey 2017-18, in the year 2015-16, gross
domestic saving was 32.3% of GDP and gross capital formation was 33.3% of
GDP.
Faulty Distribution of Assets – There is a wide disparity in the distribution of
assets in the Indian economy. In rural areas, 51% of the households have only
10% of the total assets, against this 9.6% of the households have 49 of the
total assets.
Low standard of living of the average Indian-
Most of the people in India do not get a balanced diet and its expression is
reflected in the consumption of calories and protein. While the average calorie
consumption of food is more than 3400 in most of the developed countries, it
is only 2415 in India. This is only slightly more than the minimum level of 2100
calories to sustain life.
Demographic Characteristics- Demographic traits associated with
underdevelopment include high density of population, a large proportion of
the population in the 0-15 age group and a large proportion of the population
in the working age group i.e. 15 to 60 years, despite being unskilled. In
addition, the average life expectancy is low and the infant mortality rate is
high. All these features are present in the Indian economy.
Emphasis of economic vicious cycles- Economic vicious cycles are often active
in developing countries, which obstructs the path of their development. India
is also not free from this defect. These cycles are mainly of two types, on the
demand side and on the supply side. Their mechanism of action is as follows:
Poverty – less needs are met – loss of power – low working capacity – low
productivity – low income and high poverty. Low Productivity – Low
Production – Low National Income – Low Per Capita Income – Low Saving –
Low Capital Formation – Lack of Capital – Low Appropriation – Very Low
Productivity.
Imperfections of the market- Some economists are of the view that there are
many imperfections present in the markets of semi-developed countries such
as mobility of the means of production, inelasticity of prices, ignorance of
market conditions, lack of specialization etc. In such a situation, even the
available resources are not used properly, due to which economic
development does not get momentum. India is also not untouched by the
problem.