Check sibling questions

There are 4 main Sectors of an economy

  • Household
  • Firm
  • Govt
  • External Sector

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Let's learn about them one by one

 

Household

It means customers who purchase goods and services

They also provide factor services to Firm like labour, land, capital etc for which they earn income

 

Firm

It refers to those business which produce goods and services

They may be:

  • Production Units (Factories)
  • Dealers (Shopkeepers)
  • Service Providers (Advocate, Doctor, CA)

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Government

It refers to different central, state and local government as well as Govt Department

They undertake 2 type of activities

  • Welfare Activities - Education, Police, Judiciary
  • Production Activity - Many business run by government

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External Sector

It is portion of country's economy which interacts with economies of other countries

Example:

  • Sale of Goods to Other countries (Export)
  • Purchase of goods from other countries (Import)
  • Capital Flow from Other countries (Investment made in India)
  • Capital Flow to Outside countries (Investment Outside India)

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NCERT Questions

Question 3

Describe the four major sectors in an economy according to the macroeconomic point of view.

View Answer

Other Books

Question 1

"Households and Firms depend on each other for the flow of income."

Justify this statement.

View Answer

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Transcript

What are Different Sectors of Economy? There are 4 main Sectors of an economy Household Firm Govt External Sector Different Sectors of Economy GOVERNMENT (Central Govt, State Govt and Govt Companies) HOUSEHOLDS (Customers. Employees etc) FIRMS (Manufacturers, Traders Service Providers Let's learn about them one by one Household It means customers who purchase goods and services They also provide factor services to Firm like labour, land, capital etc for which they earn income Firm It refers to those business which produce goods and services They may be: Production Units (Factories) Dealers (Shopkeepers) Service Providers (Advocate, Doctor, CA) Sale of Goods and Service from Firm to Household FIRM HOUSEHOLD Shop Sell goods Customer FIRM HOUSEHOLD Lawyer Legal Service Client Factor Service From Household To Firm HOUSEHOLD FIRM Employee Job (Factor Service) Factory HOUSEHOLD FIRM Landlord Rent (Factor Service) Office Government It refers to different central, state and local government as well as Govt Department They undertake 2 type of activities Welfare Activities - Education, Police, Judiciary Production Activity - Many business run by government Different Welfare Activities of Government HEALTH EDUCATION POLICE ROADS In this case, Government purchases different goods and services from Firms to provide to public Factory (Firm) Provides Goods Government Dept (Govt Many Employees also work in Govt Departments Government Employees (Households) Provide Service Government Department (Govt) Different Production Activities of Government In this case, Government Companies produces different goods and services and sells to Firms and households Example 1 Service Provided by Govt to Households  BSNL (Govt Company) Internet Service Customer (Household) Example 2 Goods sold by Govt to Firms  BHEL Govt Company) Machinery Factory (Firm) External Sector It is portion of country's economy which interacts with economies of other countries Example Sale of Goods to Other countries (Export) Purchase of goods from other countries (Import) Capital Flow from Other countries (Investment made in India) Capital Flow to Outside countries (Investment Outside India) Goods/Services Received from External Sector Import of Goods  Tesla, USA External Sector) Sells Car Indian Customer (Household) Import of Service  London Lawyer (External Sector) Provides Service Indian Government (Govt Sector) Investment Received Foreign Investor (External Sector) Funds Indian Start-up (Firm) SUMMARY Transactions between Different Sectors Firm Household Sell goods Factor Service Production Activity (Welfare Activities) Government Job Production Activity Import External Sector Export NCERT Questions Q3 Describe the four major sectors in an economy according to the macroeconomic point of view. Ans The four major sectors in an economy according to the macroeconomic point of view are: 1 Household It means consumers who purchase goods and services They also provide factor services to Firm like labour, land, capital etc for which they earn income 2 Firm It refers to those businesses which produce goods and services They may be Production Units (Factories) Dealers (Shopkeepers) Service Providers (Advocate, Doctor, CA) 3 Government It refers to different central, state and local government as well as Govt Departments They undertake 2 type of activities Welfare Activities -Education, Police, Judiciary Production Activity-Many businesses run by government 4 External Sector It is portion of country's economy which interacts with economies of other countries Example Sale of Goods to Other countries (Export) Purchase of goods from other countries (Import) Capital Flow from Other countries (Investment made in India) Capital Flow to Other countries (Investment Outside India) Other Books Q1 "Households and Firms depend on each other for the flow of income." Justify this statement. Ans Household It means customers who purchase goods and services They also provide factor services to Firm like labour, land, capital etc for which they earn income Firm It refers to those business which produce goods and services They may be: Production Units (Factories) Dealers (Shopkeepers) Service Providers (Advocate, Doctor, CA) 1 Households provide factors service to firms which help them produce goods and services 2 In return, they receive a factor income 3 This factor income is then used by households to purchase the goods and services sold by the firms

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Davneet Singh is a graduate from Indian Institute of Technology, Kanpur. He has been teaching from the past 12 years. He provides courses for Maths and Science at Teachoo.