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Business Environment by A. C. Fernando

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1

THE FUNCTIONING OF AN ECONOMY: BASIC CONCEPTS

This chapter defines the basic concepts of economics such as economic activity and circular flow of economic activity; and correlates it with consumption including an analysis of human wants. It describes Engel's law of family expenditure in the context of consumption, the concept of standard of living and the linkage between savings and investment in an economy.

WHAT IS AN ECONOMY?

An economy may be defined as a legal and institutional framework within which economic activity takes place. The Oxford English Dictionary defines economy “as the wealth and resources of a community, especially in terms of the production and consumption of goods and services”. In this chapter, we study all these ...

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