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There are four main divisions of economics.They are consumption, production, exchange and distribution. In modern times, economists add one more division and that is public finance.

  1. Consumption

Human wants coming under consumption is the starting point of economic activity. In this section the characteristics of human wants based on the behaviour of the consumer, the diminishing marginal utility and consumer’s surplus are dealt with.

 

  1. Production 

Production is the process of transformation of inputs into output. This division covers the characteristics and role of the factors of production namely Land, Labour, Capital and Organization and also the relationship between inputs and output.

  1. Exchange

Exchange is concerned with price determination in different market forms. This division covers trade and commerce. Consumption is possible only if the produced commodity is placed in the hands of the consumer.

  1. Distribution

Production is the result of the coordination of factors of production. Since a commodity is produced with the efforts of land, labour, capital and organization, the produced wealth has to be distributed among the cooperating factors. The reward for factors of production is studied in this division under rent, wages, interest and profit. Distribution studies about the pricing of factors of production.

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