Unit 1 | unit 1 construction economics

EEFM

Unit - 1

Construction Economics

Q1) Define economics.

A1)

Economics is a study of ‘Choices’ or ‘Choice making’. Choice making is relevant for every individual, families, societies, institution, area, state and nations and for the whole world. It also analyses how a society allocate the limited resources to achieve growth. The word ‘Economics’ originates from a Greek word ‘Oikonomikos’. This Greek word has 2 parts – ‘Oikos’ means ‘Home’ and ‘Nomos’ means Management. Hence Economics means Home management.

Economics has emerged as high level of application due to its basic principle of ‘Choice making for optimization with the given resources of scarcity and surplus’.

Evolution in the definition of Economics

Wealth definition (1776) by Adam Smith
Welfare definition (1890) by Alfred Marshall
Scarcity definition (1932) by Lionel Robbins
Growth Definition (1948) by P.A. Samuelson
Modern definition (2011) by A.C. Dhas

Wealth definition

Adam Smith is called as father of economics. He was the first one to put economics in systematic way.

He defined economics as “a science which inquires into the nature and cause of wealth of nations”

Characteristic

In simple language wealth means money, whereas in economics, it means goods which satisfy human wants.
It takes into account only material goods

Criticism

Other scientist called it as dark science or selfish science
It defined wealth in a very restricted sense
It emphasized on the means to get rich and how to make money

Welfare definition

In 1890, Alfred Marshall stated that “'a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of material requisites of well being”

Characteristics

It is primarily the study of mankind
One side it is the study of wealth on the other side study of man
It considers only ordinary business of life. It is not concerned with other aspects of man’s life like social, religious and political
It studies the cause of material welfare. It limits the scope welfare which is related to wealth.

Criticism

It considers economics as social science rather than a human science
Welfare has wide meaning and in the definition it is not clear
The definition only link about wealth and welfare which is strongly criticized.
Definition is classificatory and not analytical. It considers production of material goods alone. But services of teacher, judge do not produce material goods are not considered as economic activity which is a wrong view.

Scarcity definition

According to Lionel Robbins: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

He emphasizes on ‘choice under scarcity’. In other words, “Economics is concerned with that aspect of behavior which arises from the scarcity of means to achieve given ends”

Characteristics

Economics is a positive science
It brings into consideration new concept – unlimited ends, scarce means and alternate use of means
Human wants are unlimited. When one wants is satisfied, then several other wants grow up
Human wants are unlimited but resources are limited
All scarce means are used for several purposes. e.g. – land is scarce but are used for buildings, cultivation, etc
It emphases on choice of making of an economic activity

Criticism

The definition is not dynamic in nature. It discusses the problem of present but not future generation
It does not take into consideration the possibility of increase in resources overtime
Not fit for rich counties. It focuses only on limited resources. But resources are plenty in rich countries
It does not focus on many other economic issue of unemployment, income determination, economic growth and development

Growth definition

According to Prof. Paul A Samuelson, “Economics is the study of how men and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in the future amongst various people and groups of society”

Characteristic

It is more dynamic approach
It is not only concerned with allocation of resources but also expansion of resources
It analyses how growth of resources can be used to satisfy the increasing wants of human
It is comprehensive in nature both growth oriented as well as future oriented
It has all the features of earlier definition
It focuses both on production and consumption activities

Criticism

It ignored surplus resource condition

Modern definition of economics

Prof. A.C. Dhas defines economics as "The study of choice making by individuals, institutions, societies, nations and globe under conditions of scarcity and surplus towards maximizing benefits and satisfying the unlimited present and future needs.”

In short, the subject Economics is defined as the “Study of choices by all in maximizing production and consumption benefits with the given resources of scarce and surplus, for present and future needs.”

Characteristics

It considers all the earlier definition of economics
It covers both macro and micro aspects of economics
It considers both production and consumption activities.
It emphasizes Choice Making dimension of economics.
It aims at obtaining maximum benefits with given resources
It is suitable in conditions of both scarcity and surplus.

Q2) Explain importance of economics in construction industry.

A2) The construction industry is an important sector that contributes more in the economic growth of the country. With the contribution of construction industry to the economic development and economic activities, it contributes a high significant affect in the development of the country. Construction industry is also said to be an investment-led sector where government shows high interest. Government contracts with construction industry for the development of an infrastructure related to health, transport as well as education sector.

Q3) Explain balance sheet.

A3) The assets on the balance sheet consist of what a company owns or will receive in the future and which are measurable. Liabilities are what a company owes, such as taxes, payables, salaries, and debt. The shareholders' equity section displays the company's retained earnings and the capital that has been contributed by shareholders. For the balance sheet to balance, total assets should equal the total of liabilities and shareholders' equity.

Assets

Assets are the first of three major categories on the balance sheet. Current assets represent the value of all assets that can reasonably expect to be converted into cash within one year and are used to fund ongoing operations and pay current expenses. Some examples of current assets include:

Cash and cash equivalents
Accounts receivable
Prepaid expenses
Inventory
Marketable securities

Noncurrent assets are a company’s long-term investments or any asset not classified as current. Both fixed assets, like plant and equipment, and intangible assets, like trademarks, fall under noncurrent assets. Some examples of noncurrent assets are:

Land
Property, plant, and equipment
Trademarks
Long-term investments and even goodwill

Liabilities

Current liabilities are short-term liabilities that are due within one year and include:

Accounts payable are a short-term debt owed to suppliers.
Accrued expenses are expenses that have yet to be paid, but have a high probability of being paid.

Noncurrent liabilities are also listed on the balance sheet and are included in the calculation of a company's total liabilities. Noncurrent liabilities are long-term debts or obligations and unlike current liabilities, a company does not expect to repay its non-current liabilities within a year. Some examples of noncurrent liabilities include:

Long-term lease obligations
Long-term debt like bonds payable

Q4) Explain Micro economics.

A4) Microeconomics (Greek prefix micro-meaning "small") is a department of economics that research the conduct of people and groups in making choices approximately the allocation of scarce assets. "Interaction among those people and groups"

Microeconomics is a observe of character, family, and company conduct in choice making and aid allocation. It usually applies to the marketplace for items and offerings and offers with non-public and economic problems.

Meaning

Microeconomics is a department of economics that research the conduct of people and groups in making choices approximately the allocation of scarce assets and their interactions among people and groups.

This is taken into consideration to be fundamental economics. Microeconomics may be described as a discipline of financial evaluation that research the financial conduct of character units, which include people, precise households, or precise companies.

The production of goods and services is based on the allocation of scarce resources.

Efficient Goods Distribution – It investigates issues related to

(a) product pricing,

(b) factor pricing, and

a. Product pricing – Includes product pricing under monopoly, perfect competition, etc., taking into account supply, demand, production costs, and more.

b. Factor Pricing-Prices factor inputs such as land, labor, capital, and organization in the form of rent, wages, interest, and profits, respectively.

c. Economic Welfare – It includes research on the greatest interests for producers and the greatest interests for consumers.

Q5) Explain macroeconomics.

A5) The term "macro" was first utilized in economics by Frisch in 1933. However, it came from the 16th and 17th century mercantilists as a methodological approach to economic problems. They were interested in the entire economic system. In the 18th century

Physiocrats adopted it in the table economy, showing a "cycle of wealth" (i.e., net production) among the three classes represented by the peasant, landowner, and barren classes.

Malthus, Sismondi and Marx within the 19th century addressed macroeconomic issues. Walrus, Wicksell and Fisher contributed modernly to the development of pre-Keynes macroeconomic analysis.

Certain economists such as Cassel, Marshall, Pigoubian, Robertson, Hayek, and Hortley developed the Quantity Theory of Money and General Price Theory in the decade following World War I. However, Keynes eventually developed a general theory of income, output, and employment. I have credibility in the wake of the Great Depression.

Economics is the science of producing, exchanging, and consuming various commodities in the economic system. It is a rare resource that can reduce the abundance of human welfare. The central focus of economics is the choice between resource depletion and its alternative uses. The word "economics" comes from the Greek words "oikos" (house) and nemein (manage), which means to manage a household with limited funds.

Macroeconomics is a crucial concept that considers the entire country and works for the welfare of the economy.

1. Business cycle analysis

Timing of economic fluctuations helps prevent or prepare for financial crises and long-term negative situations.

2. Formulation of economic policy

The fiscal and monetary policy system relies entirely on an extensive analysis of the country's macroeconomic situation.

3. Reduce the effects of inflation and deflation

Macroeconomics is primarily aimed at helping governments and financial institutions prepare for a country's economic stability.

4. Promote material welfare

This economic stream provides a broader perspective on social or national issues. Those who want to contribute to the welfare of society need to study macroeconomics.

5. Regulate the economic system

It continues to guarantee or check the proper functioning and actual position of the country's economy.

6. Solve economic problems

Macroeconomic theory and problem analysis help economists and governments understand the causes and possible solutions to such macro-level problems.

7. Economic development

By utilizing macroeconomic data to respond to various economic conditions, the door to national growth will be opened.

Q6) Explain the difference between macro and micro economics.

A6) Micro Economics

Microeconomics (Greek prefix micro-meaning "small") is a department of economics that research the conduct of people and groups in making choices approximately the allocation of scarce assets. "Interaction among those people and groups"

Meaning

The production of goods and services is based on the allocation of scarce resources.

Efficient Goods Distribution – It investigates issues related to

(a) product pricing,

(b) factor pricing, and

a. Product pricing – Includes product pricing under monopoly, perfect competition, etc., taking into account supply, demand, production costs, and more.

b. Factor Pricing-Prices factor inputs such as land, labor, capital, and organization in the form of rent, wages, interest, and profits, respectively.

c. Economic Welfare – It includes research on the greatest interests for producers and the greatest interests for consumers.

Macroeconomics

The term "macro" was first utilized in economics by Frisch in 1933. However, it came from the 16th and 17th century mercantilists as a methodological approach to economic problems. They were interested in the entire economic system. In the 18th century

Physiocrats adopted it in the table economy, showing a "cycle of wealth" (i.e., net production) among the three classes represented by the peasant, landowner, and barren classes.

Malthus, Sismondi and Marx within the 19th century addressed macroeconomic issues. Walrus, Wicksell and Fisher contributed modernly to the development of pre-Keynes macroeconomic analysis.

Macroeconomics is a crucial concept that considers the entire country and works for the welfare of the economy.

1. Business cycle analysis

Timing of economic fluctuations helps prevent or prepare for financial crises and long-term negative situations.

2. Formulation of economic policy

The fiscal and monetary policy system relies entirely on an extensive analysis of the country's macroeconomic situation.

3. Reduce the effects of inflation and deflation

Macroeconomics is primarily aimed at helping governments and financial institutions prepare for a country's economic stability.

4. Promote material welfare

This economic stream provides a broader perspective on social or national issues. Those who want to contribute to the welfare of society need to study macroeconomics.

5. Regulate the economic system

It continues to guarantee or check the proper functioning and actual position of the country's economy.

6. Solve economic problems

Macroeconomic theory and problem analysis help economists and governments understand the causes and possible solutions to such macro-level problems.

7. Economic development

By utilizing macroeconomic data to respond to various economic conditions, the door to national growth will be opened.

Q7) Explain basic economic problems.

A7) Problem 1. What to produce and in what quantity?

The first significant problem of the financial system is determining which items and offerings to supply and in what quantity. This consists of the allocation of scarce sources associated with the composition of overall manufacturing withinside the financial system. Due to the dearth of sources, society has to determine what merchandise to supply, inclusive of wheat, cloth, roads, televisions, power and buildings.

Once the nature of the product to be produced is determined, the quantity is determined. Tonnage of wheat, number of televisions, millions of kilowatts of electricity, number of buildings, etc. Due to the lack of economic resources, the question of the nature and quantity of goods should be determined based on: Social priorities or preferences.

If society prioritizes the production of more consumer goods than it does now, it will be less in the future. A high priority for capital goods means less consumer goods now and in the future. However, due to lack of resources, if one product is mass-produced, another product must be mass-produced.

This problem can also be explained using a productivity curve, as shown in Figure.

Suppose the economy produces capital goods and consumer goods. In determining the total output of an economy, society must choose that combination of capital and consumer goods that is in harmony with its resources.

The combination R inside the productivity curve PP1 is not selectable as it reflects the economic inefficiency of the system in the form of resource unemployment. Nor is it possible to select a combination R that is outside the scope of society's current productivity. Society lacks the resources to create this combination of capital and consumer goods.

Therefore, you should choose from combinations Â, E, or D that give you the highest level of satisfaction. If society decides to have more capital goods, it chooses combination B. If you need more consumer goods, choose Combination D.

Problem # 2. How to produce these products?

The next fundamental issue of the economy is determining the technology and methods used to produce the goods needed. This issue depends primarily on the availability of resources within the economy.

If you have a lot of land, it may be extensive farming. If you are short on land, you can use intensive tillage methods. If you have a large workforce, you may use labor-intensive technology. On the other hand, in the case of labor shortage, capital-intensive methods may be used.

The technology used also depends on the type and quantity of products produced. Producing capital goods and large-scale products requires complex and expensive machinery and technology. Simple consumer goods and small products, on the other hand, require small, inexpensive machines and relatively simple technology.

In addition, it is necessary to decide what goods and services will be produced in the public sector and what goods and services will be produced in the private sector. However, when choosing from different production methods, it is necessary to adopt methods that bring about efficient allocation of resources and improve the productivity of the economy as a whole.

Suppose the economy is producing a certain amount of consumer and capital goods at point A on the PP curve in Figure. Considering the supply of elements, adopting new production technology will improve the production efficiency of the economy. As a result, the PP0 curve shifts outward to P1P1.

This will produce more consumer and capital gods from point A on the PP0 curve to point С on the PP, creating a new productivity curve and the economy will produce more of both commodities from point A. Go to.

Problem # 3. For whom is the product produced?

The third basic issue to be decided is the distribution of goods among the members of society. Basic consumer goods and necessities, luxury comfort, and distribution between households are based on the distribution of national income.

Anyone who has the means to buy goods may have it at that time. The rich make up the majority of luxury goods, and the poor may have more of the basic consumer goods they need. This problem is shown in Figure. Here, the productivity curve PP shows the combination of luxury goods and necessities.

At the point В of the PP curve, the economy has created a lot of luxury for the wealthy and less needed for the art. On the other hand, at point D, we are increasing the OH required for the poor and decreasing the need for the rich.

Problem # 4. How efficiently are your resources being used?

This is one of the key fundamental issues of the economy. Because, after making the previous three decisions, society needs to make sure that its resources are being fully utilized. When economic resources are wasted, we must find ways and means to make full use of them.

If the laziness of resources such as human resources, land and capital is due to male allocation, society needs to adopt such financial, financial or physical measures to remedy this. This is shown in Figure. Here, the productivity curve PP reflects the idle resources in the economy at point A, and the productivity curve P1P1 reflects the full utilization of resources at point Â or C.

Society produces more capital goods at point Â, more consumer goods at point C, or full employment at point D in an economy where available resources are fully utilized. Decide whether to produce both at the level. It is characterized by technical efficiency or full employment.

To keep it at this level, the economy must constantly increase production of some goods and services by giving up on others.

Problem # 5. Is the economy growing?

The last and most important issue is determining whether the economy is growing or stagnant over time. If the economy is stagnant at any point within the productivity curve, as shown in Figure, then you need to move to the productivity curve PP. This causes the economy to produce more consumer and capital goods.

Economic growth occurs through higher capital formation rates, which consist of replacing existing capital goods with new and more productive ones, either by adopting more efficient production technologies or through innovation.

This shifts the productivity curve outward from PP to P1P1. The economy moves from point A on the P1P1 curve to В or С or D, for example after 5 years. Point С represents a situation in which both consumer and capital goods are mass-produced in the economy. Economic growth allows the economy to have more of both commodities.

Q8) Explain structure of construction industry.

A8) A construction company’s organizational structure refers to both the arrangement of job roles and the reporting and operational relationships between and within these roles. A variety of roles and responsibilities – including marketing, purchasing, human resources, finance, pre-construction tasks and construction operations – most often make such a corporate structure organized according to departments, functions or areas of responsibilities most appropriate to organizational design.

Functional Design Characteristics

Functional departmentalization is an example of a traditional, hierarchical organizational structure. Defining characteristics include horizontal separation of the various departments and functions, well-defined lines of control and top-down communications. For example, authorities and communications flow from the business owner to the management team to project managers or superintendents and finally to rank-and-file construction employees.

A main reason most construction companies group roles that require similar knowledge and skills into a functional organizational structure is that it increases operational efficiency and promotes the development of departmental expertise.

Departmental Horizontal Separation

The size of a construction company determines the degree of horizontal separation. Although the business owner assumes a general management role regardless of the size of the business, the business owner’s roles and responsibilities are often greater in a small construction company. In addition, while larger construction companies most often include a higher degree of horizontal separation, smaller companies may combine similar roles.

For example, small companies may combine marketing and development, and community affairs into a single business development department, while a larger company might separate these into two distinct departments.

Directional Communication Patterns

A main disadvantage of a departmentalized organizational structure is that it can lead to situations in which department goals, such as risk management and construction operations, become more important than overall strategic company objectives. In addition, coordination of work efforts across departmental boundaries may become more difficult or confusing the larger a construction company becomes.

Directional communication patterns characteristic of a departmentalized organizational structure may contribute to the development of these situations. For example, horizontal communications most often only take place between staff members of equal or comparable rank, while vertical patterns typically relate to a business’s internal chain-of-command. In the absence of a good horizontal communication system, this could lead to lower-ranking project managers or superintendents continually finding themselves answering to multiple senior department heads.

Inter-Departmental Organizational Design

Specific job roles follow the same hierarchical structure, decision-making and communications flow. For example, authorities in a hierarchical structure in the construction operations department might flow from the operations department head to project executives to project managers to project superintendents. The degree of authority, however, depends on company policies and often on the size of the business.

In some construction companies, the project superintendent might focus solely on organizing, planning and scheduling a construction project, leaving all responsibilities associated with site supervision to the project or site manager. In others, however, the project supervisor might take a more direct field supervision role, requiring the project or site manager to follow and administer higher-level decisions.

Q9) Explain economics of roads and building.

A9) Roads are the arteries through which the economy pulses. By linking producers to markets, workers to jobs, students to school, and the sick to hospitals, roads are vital to any development agenda. Since 2002, the World Bank has constructed or rehabilitated more than 260,000 km of roads. It lends more for roads than for education, health, and social services combined. However, while roads bring economic and social benefits, they can also come with social costs such as pollution or deforestation. The Amazon rainforest is crisscrossed by almost 100,000 km of roads—enough to circle the Earth two and a half times. And the transport sector accounts for about 23 percent of global energy-related carbon dioxide emissions and a significant share of local particle pollution. Such tradeoffs need to be weighed when planning any intervention.

Roads make a crucial contribution to economic development and growth and bring important social benefits. They are of vital importance in order to make a nation grow and develop. In addition, providing access to employment, social, health and education services makes a road network crucial in fighting against poverty. Roads open up more areas and stimulate economic and social development. For those reasons, road infrastructure is the most important of all public assets.

Surveys show that adequately maintaining road infrastructure is essential to preserve and enhance those benefits. But a backlog of outstanding maintenance has caused irreversible deterioration of the road network. If insufficient maintenance is carried out, roads can need replacing or major repairs after just a few years. That deterioration spread across a road system very quickly results in soaring costs and a major financial impact on the economy and citizens.

Management of the road asset involves the application of engineering, financial and management practices to optimize the level-of-service outcome in return for the most cost-effective financial input. Indeed, the main objective is simply to apply the right treatment at the right time to achieve the desired level of service, indicating that the road infrastructure is a financial asset for society and the economy.

Q10) Explain economics of irrigation.

A10) Irrigated farming is a traditional agricultural practice developed over the centuries in countries with a hot climate. Many generations have expended important material and financial resources for the development of irrigation. In droughty regions, artificial increase of soil moisture content (using irrigation systems) is frequently the only measure capable of meeting the demands of the local population and industry for crop and animal products. Land irrigation improves the water−salt balance of the soil and sustains its economic fertility.

Irrigation farming involves a higher level of agricultural production standards, as compared to dry farming. Its specificity is the use of two principal means of production land and water in a single technology of crop production. From the viewpoint of economics, the increase in productivity in irrigation farming is due to capital investment into the fertility of irrigated areas.

An irrigation system (IS) is a technological synthesis of water management and agriculture, realized through transportation of water from a source to an irrigated field. Therefore, the economics of IS is closely related to the economics of water management and agriculture.

The construction and management of ISs have been continuously improved through application of science and technology. This can now be regarded as an independent branch of economic activity in the field of land development and land reclamation.

The productivity of agricultural land under natural conditions is mainly determined by the land category, soil quality, and climatic conditions. The effect of irrigation on land productivity differs across the world regions and depends on the natural level of soil moistening. In the droughty regions of Asia, Africa, the Middle East, and South America, the potential productivity of agricultural land increases significantly with artificial irrigation, in combination with other agricultural practices.

Irrigated areas constitute about 17% of the total farmland in the world and provide 50% of the global agricultural produce. In the Middle Eastern countries, irrigated fields yield 70% of the agricultural produce.

The volume of irrigation water conveyed to a field dictates the engineering parameters of the IS. This volume is calculated from data on the water budget of the soil and water consumption of each crop. Increase in crop yield from irrigation in the zone of insufficient precipitation is much higher than that in zones where rainfall is plentiful. In droughty regions, irrigation increases the productivity of the land by a factor of two or more.

The objective of irrigated is to decrease dependence of agriculture on climatic conditions. In tropical and subtropical regions, irrigation farming makes it possible to produce agricultural commodities (grain, fodder, vegetables, and fruits) all the year round. Though expenditure of labor, financial, and material resources per unit area of irrigated farmland are higher than those in dry farming, the gain in yield makes irrigation farming economically attractive.

In irrigated farming, water is an essential element of production. By period of water supply, two types of irrigation are distinguished: seasonal irrigation (SIr) and continuous irrigation (CIr).

SIr depends on the number and duration of rainy and dry seasons, and the height of floods. Water for irrigation is accumulated by the establishment of 30 to 40 cm high earth embankments on fields, and by construction of dams in order to retain rainwater and floodwater. This type of irrigation is widespread in southern and south-eastern Asia.

CIr makes use of rivers, water reservoirs, wells, and other water sources via the construction of a complex irrigation system, including mechanical or gravity water extraction, inter-farm conveying channels, networks of farm channels, gutters, and pipelines delivering water to particular fields, and irrigation equipment to ensure appropriates rates and timing of irrigation.

Q11) Explain ports and aviation.

A11) The sectors of port and aviation are very important for the growth and development of any economy. This is because they involve handling of both commuter as well as cargo traffic. In India, the government has taken several initiatives for the growth of these sectors. But a lot more is to be done given the potential of both these sectors.

Port sector

As per a report of India Brand Equity Foundation (IBEF), the cargo traffic attended by Indian ports in 2015 were of value 1,052 Million Metric Tonnes (MMT) which is going to increase to 1,758 MMT by 2017. Though the increase is not very significant but it is important to sustain the growth for which cooperation between the private sector and the government is needed. The government has declared several initiatives for the betterment of the sector. Prominent among them include the Sagarmala initiative wherein the government plans to invest 70,000 crore for development of 12 major ports in the next five years. The initiatives like Sagarmala provide wonderful opportunities of public private partnerships.

Out of the ports operational in India, major ports are registering a steady growth as compared to minor ports. According to an IBEF report, major ports saw a 4.6% yearly increase of cargo traffic. The value rose to 264.73 million tonnes during April -August in 2016. The report also gave the segment wise percentage of the cargo traffic attended at ports which stands as P.O.L.(Port of Loading) at 32.44 %, coal at 24.09%, container traffic at 19.65%, other cargo at 12.68 %, iron ore at 4.6% and other liquids at 4.13%.Regarding minor ports, a report by ICRA (Information and Credit Rating Agency)states that there has been a decline in volumes of cargo handling by 1% in the Financial Year (FY) 2016.The drop is of 18% in iron ore, 11% in other cargo and 8% in coal volumes.

In such a scenario, the economists are of the view that the government needs to consider issues related to both major and minor ports. It should devise port specific plans to make them profitable. This would ensure business for minor as well as major ports. The government is increasing its budgetary allocation for the sector on a regular basis. For instance, the revised estimate of the Budget 2016-17 had 450 crore for the Sagarmala project which has been increased to 600 crore in the Budget estimate of 2017-18. But then it is important to review the success of projects regularly and subsequently address the shortcomings. The government also needs to pay attention to the concerns of the private companies regarding availability of liquidity. Together with banking institutions, the government can devise mechanisms which can benefit all parties.

Regarding foreign investments, a report by the Department of Industrial Policy and Promotion (DIPP) under Ministry of Commerce and Industry states that Foreign Direct Investment (FDI) received by the Indian ports sector between April 2000 and March 2016 was of value $1.64 billion. The experts feel that the investment in the sector can increase from the foreign shores in future as the government has allowed 100 % FDI. The quantity of investment will only vary depending on global economic situation.

Economists are of the view that investments from abroad will serve several purposes. It will bring in the required technologies necessary for the upgradation of the cargo handling capacity of the existing ports. Also, by virtue of the new investments, permanent assets will be created in form of establishment of new ports. Economic activity will be escalated. Also, with buzzing economic activity taking place at the ports, foreign trade will increase.

Aviation

International Air Transport Association (IATA) in a report has estimated that India which is currently at ninth position will become the third largest aviation marketplace replacing the United Kingdom by 2026.With several governmental initiatives in place along with eager participations from the private sector, the aviation sector has bright prospects.

Both the cargo and passenger traffic segment is showing steady increase in capacity. According to a report by Department of Industrial Policy and Promotion (DIPP), Ministry of Civil Aviation, the passengers carried by scheduled domestic airlines have increased by 29% from 148 million during April 2012 to March 2014 to 190 million in April 2014 to March 2016.Also a latest report from the Directorate General of Civil Aviation (DGCA) states that total passenger traffic increased by 23.10 % to 90.36 million during January to November 2016. This shows that there is no dearth of passengers for the airline’s companies. In fact, a vast price conservative market is lying untapped. Both luxury and low-cost carriers can cater to this market by lowering the price of air tickets.

Regarding cargo handling, a report from Airport Authority of India (AAI) shows that the international and domestic freight traffic both have registered a growth of 8.2% and 4.7% respectively leading to an increment of 6.9% in total freight traffic during April to June 2016-17 as compared to April to June 2015-16.

Also due to government allowance of 100% FDI in airports and nonscheduled air carriers under automatic route, the FDI inflow has substantially increased in the sector. The report by DIPP states that the rate of FDI has grown by 605% from $61.84 million during April 2012 to March 2014 to $435.81 million from April 2014 to March2016.

Further, the government initiatives like framing a concrete National Civil Aviation Policy (NCAP) 2016, launching of UDAN (Ude Desh ka Aam Naagrik) scheme, development of Maintenance, Repair and Overhaul (MRO) sector in India related to aviation will act in boosting the sector. The provisions of Budget 2017-18 like development of some selected airports of tier two cities under the PPP mode, modification of Airport Authority of India Act for enhanced usage of land assets will pave way for more sectoral investments.

Q12) Explain economics definition and importance of construction industry.

A12)

Economics has emerged as high level of application due to its basic principle of ‘Choice making for optimization with the given resources of scarcity and surplus’.

Evolution in the definition of Economics

f. Wealth definition (1776) by Adam Smith

g. Welfare definition (1890) by Alfred Marshall

h. Scarcity definition (1932) by Lionel Robbins

i. Growth Definition (1948) by P.A. Samuelson

j. Modern definition (2011) by A.C. Dhas

Wealth definition

Adam Smith is called as father of economics. He was the first one to put economics in systematic way.

He defined economics as “a science which inquires into the nature and cause of wealth of nations”

Characteristic

In simple language wealth means money, whereas in economics, it means goods which satisfy human wants.
It takes into account only material goods

Criticism

Other scientist called it as dark science or selfish science
It defined wealth in a very restricted sense
It emphasized on the means to get rich and how to make money

Welfare definition

Characteristics

It is primarily the study of mankind
One side it is the study of wealth on the other side study of man
It considers only ordinary business of life. It is not concerned with other aspects of man’s life like social, religious and political
It studies the cause of material welfare. It limits the scope welfare which is related to wealth.

Criticism

It considers economics as social science rather than a human science
Welfare has wide meaning and in the definition it is not clear
The definition only link about wealth and welfare which is strongly criticized.
Definition is classificatory and not analytical. It considers production of material goods alone. But services of teacher, judge do not produce material goods are not considered as economic activity which is a wrong view.

Scarcity definition

According to Lionel Robbins: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

He emphasizes on ‘choice under scarcity’. In other words, “Economics is concerned with that aspect of behavior which arises from the scarcity of means to achieve given ends”

Characteristics

Economics is a positive science
It brings into consideration new concept – unlimited ends, scarce means and alternate use of means
Human wants are unlimited. When one wants is satisfied, then several other wants grow up
Human wants are unlimited but resources are limited
All scarce means are used for several purposes. e.g. – land is scarce but are used for buildings, cultivation, etc
It emphases on choice of making of an economic activity

Criticism

The definition is not dynamic in nature. It discusses the problem of present but not future generation
It does not take into consideration the possibility of increase in resources overtime
Not fit for rich counties. It focuses only on limited resources. But resources are plenty in rich countries
It does not focus on many other economic issue of unemployment, income determination, economic growth and development

Growth definition

Characteristic

It is more dynamic approach
It is not only concerned with allocation of resources but also expansion of resources
It analyses how growth of resources can be used to satisfy the increasing wants of human
It is comprehensive in nature both growth oriented as well as future oriented
It has all the features of earlier definition
It focuses both on production and consumption activities

Criticism

It ignored surplus resource condition

Modern definition of economics

Characteristics

It considers all the earlier definition of economics
It covers both macro and micro aspects of economics
It considers both production and consumption activities.
It emphasizes Choice Making dimension of economics.
It aims at obtaining maximum benefits with given resources
It is suitable in conditions of both scarcity and surplus.

Importance in construction industry

The construction industry is an important sector that contributes more in the economic growth of the country. With the contribution of construction industry to the economic development and economic activities, it contributes a high significant affect in the development of the country. Construction industry is also said to be an investment-led sector where government shows high interest. Government contracts with construction industry for the development of an infrastructure related to health, transport as well as education sector.

Q13) Explain problem what goods to produce?

A13) The first significant problem of the financial system is determining which items and offerings to supply and in what quantity. This consists of the allocation of scarce sources associated with the composition of overall manufacturing withinside the financial system. Due to the dearth of sources, society has to determine what merchandise to supply, inclusive of wheat, cloth, roads, televisions, power and buildings.

This problem can also be explained using a productivity curve, as shown in Figure.

Q14) Explain how to produce good?

A14) The next fundamental issue of the economy is determining the technology and methods used to produce the goods needed. This issue depends primarily on the availability of resources within the economy.

Q15) Explain for whom is the product produced?

A15) The third basic issue to be decided is the distribution of goods among the members of society. Basic consumer goods and necessities, luxury comfort, and distribution between households are based on the distribution of national income.

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