Page 30 - Understanding Economics for Class 10

Example: A farmer who sells wheat to a Example: Wheat and wheat flour are
flour mill for `20 per kg. The mill grinds intermediate goods.
the wheat and sells the flour to a biscuit
company for `25 per kg. The biscuit company
Goyal Brothers Prakashan
uses the flour and things such as sugar and
oil to make four packets of biscuits. It sells
biscuits in the market to the consumers for
` 80 (` 20 per packet). Biscuits are the final
goods, i.e., goods that reach the consumers.
 Precaution to take while calculating total value:
 Value of only final goods and services are counted. Not all the goods (or services)
that are produced and sold is counted. We can see from above example that the value
of final goods already includes the value of all the intermediate goods that are used in
making the final good. Hence, the value of `80 for the biscuits (final good) already
includes the value of flour (`25).

 To count the value of the flour and wheat separately is therefore not correct because
then we would be counting the value of the same things a number of times.
 The value of all the final goods and services produced in each sector during a
particular year provides the total production of the sector for that year. And the sum
of production in the three sectors gives the Gross Domestic Product (GDP) of a country.

 It is the value of all final goods and services produced within a country during a particular year.
 GDP shows how big the economy is.
 In India, the mammoth task of measuring GDP is undertaken by a Central Government
Ministry.
 It collects information relating to total volume of goods and services and their prices with
the help of various government departments of all the Indian states and union territories,
and then estimates the GDP.

historical change in Sectors
 At initial stages of development, (noted from the histories of many, now developed,
countries) primary sector was the most important sector of economic activity.
 Due to improved methods of farming agricultural sector began to prosper. Production
increased and this sector also employed large number of people.
 Many people started taking up other activities like craft, transporters, administrators, army
etc. Buying and selling activities also increased.
 Over a long time, because of new methods of manufacturing, factories began to flourish.
People working in secondary sector and production of industrial goods both increased.
Use of industrial goods which were produced at cheaper rates in factories increased. This
shows a Shift from primary to secondary sector. Gradually, this sector became the most
important sector in terms of production and employment both.

 There has been a further shift in the past 100 years from secondary to service sector in
developed countries. Service sector has become the most important sector in terms of both
employment and total production. This shows a Shift from secondary to tertiary sector.

E-24 Economics Class X