Architect

uredoesn'texistoutsideoftheeconomyandi nfact
,
howwebui l
deachbui ldingdirectl
yaffect
stheeconomyofour
cit
ies.Asapr ofessi
on,ar chi
tectureactsasthemediat
or
betweendi f
ferentspecialti
es,anditi
sv er
yimport
anttospeak
theoffici
all
anguageofeachoft hem.

Economi cArchitecturefocusesonst ructurali

nnovati
onsthat
harnessthepoweroft hemar kettoimprov ethequali
tyand
characterofpeopl e'sl
ives..
..Theyef f
ecti
velychangedwhat
themar ketvalued, andasar esulttheyarechangingthepatter
n
ofactiv
ityinthemar ketpl
ace.

Economi cs ist
hesocialsciencet
hatstudi
eshowpeople
i
nteractwiththi
ngsofv alue;i
npart
icul
ar,
theproduction,
dist
ri
bution,andconsumptionofgoodsand
[4]
serv
ices.
Economicsfocusesonthebehav
iourandint
eract
ions
ofeconomicagentsandhoweconomi eswork.
Mi cr
oeconomi csanalyzesbasi celementsintheeconomy ,
i
ncludingindi
vi
dual agentsandmar kets,
thei
rint
eract
ions,and
theoutcomesofi nteracti
ons.Indi
v i
dualagentsmayinclude,f
or
exampl e,
households, f
ir
ms, buyers,andsell
ers.
Microeconomi cs-t hebranchofeconomi csthatstudieshow
househol dsandbusi nessesreachdecisi
onsaboutpur chasing,
savings, sett
ingpr i
ces,competiti
oninbusiness,et
c.Itfocuses
atthei ndivi
duallevel,whil
emacr oeconomicslooksatt he
decisionst hataf
f ectenti
recountri
esandsoci et
yasawhol e.

Macroeconomi csanalyzestheeconomyasasy st
em where
product
ion,consumpt i
on,savi
ng,andinvestmentint
eract
,and
fact
orsaffecti
ngit:employmentoftheresourcesoflabour
,
capit
al,
andl and,curr
encyinfl
ati
on,economicgrowth,and
publi
cpolici
esthathav eimpactontheseelements.
Macr
oeconomi
cs-t
hebr
anchofeconomi
cst
hatst
udi
est
he
overallworki
ngofanat ionaleconomy .Itismorefocusedon
thebigpictureandanal yzingthingssuchasgr owth,i
nflat
ion,
i
nterestrates,unempl oyment,andt axes.Wheny ouhearthe
FederalReservei sraisi
nginterestrat
esort hatt
henational
unempl oymentr ateis7.5%,youar ehear i
ngabout
macr oeconomi ctopics.
Otherbr
oaddi st
inct
ionswi thi
neconomi csincl
udethose
betweenpositi
veeconomi cs,describi
ng"whatis",
andnormati
v eeconomi cs,advocating"whatoughttobe"
;
betweeneconomi ctheoryandappl iedeconomics;
betweenrat
ionalandbehav iouraleconomics;and
[
5]
betweenmainstream economi csandhet er
odoxeconomics.
Economi canal ysiscanbeappl iedthr
oughoutsoci
ety ,
inreal
[
6] [7]
estat
e, busi ness, f i
nance,health
[
8] [
9]
care, andgov ernment . Economi canalysi
sissomet imesalso
appli
edt osuchdi v ersesubjectsas
[10] [11]
cri
me, education, t hefami l
y,law,pol
it
ics,
rel
igi
on, soci
al
[12] [
13] [14]
i
nstit
utions,war , sci ence, andt heenvir
onment.

 Economi csi st hest udyofhowpeopl eal locatescar ce

resourcesf orpr oduct ion,di
stri
but ion, andconsumpt i
on,
bothindiv i
dual l
yandcol lect
ively.
 Twomaj ort ypesofeconomi csar emi cr oeconomi cs,
whichf ocusesont hebehav iorofi ndi vidual consumer s
andpr oducer s, andmacr oeconomi cs, whi chexami ne
overalleconomi esonar egi
onal, national ,orinternati
onal
scale.
 Economi csi sespeci all
yconcer nedwi thef f
iciencyin
productionandex changeandusesmodel sand
assumpt ionst ounder standhowt ocr eat eincent i
vesand
poli
ciest hatwi llmax imizeefficiency .
 Economi stsf or mulateandpubl ishnumer ouseconomi c
i
ndicators, suchasgr ossdomest icpr oduct( GDP)andt he
ConsumerPr iceIndex( CPI)
.
 Capitali
sm, sociali
sm, andcommuni sm ar et ypesof
 economi
csy
stems.

Hi
stor
y,Ti
mel
ine,
&Not
abl
eFi
gur
es
Thehi st
or yofeconomi csentail
snumer ousfi
gur
es, courses,
andbooksandcanbet racedbackt housandsofy ears.We'l
l
focusstrictl
yont helast300y earsandwhati soften
consideredt hebeginni
ngofmoder n-dayeconomi cthinki
ng.
Herear eaf ewoft hemostnot ablethinkersandtheir
accompl i
shment s:

1700s
Adam Smithi
sl ar
gelyconsi
der edthefatherofmoder n
economicsandcapi t
ali
sm.Smi t sWeal
h' thofNati
onshasa
hugeimpactoneconomi cthoughtst i
l
ltoday .Hereasonedthat
marketswouldwor kbesti
fleftaloneandpr omotedt hatl
i
ttl
e
governmenti
nterventi
onintheeconomywasbest .

1800s
ThomasMal thusstudi
edpopul
ati
ons,
andhi smain
contr
ibut
ionsincl
udehisworkonther
elat
ionshi
pbetweenf
ood
suppl
yandpopul at
ions.
Karl
Mar xismostnotedforhi
sadvocacyofsociali
sm and
communi sm ov
ercapit
ali
sm,whichhestrongl
ydenounced.He
i
sarguablyoneofthemostinfl
uenti
aleconomistsinhi
story.
Marxbeli
evedthatcommunism wasinevit
ablei
nt heprocess
ofevol
uti
on.
Alf
redMar shallf
ocusedonthestudyofmi croeconomi csand
wrotePrinciplesofEconomics,
whi chisoneoft hemost
i
nfluent
ial economictext
booksofal l
time.Mar shal
lproposed
theideathateconomi cswasasci enti
fi
cdiscipli
nethatrequi
red
mor emat hemat i
csandlessphi
losophy .
1900s
JohnMay nardKey neswasoneoft hemostrevoluti
onary
economistsofthe20t hcentur
y.Hear guedagainstfr
ee-market
pri
nci
plesandpr omot edgover
nmenti nvol
vementasameans
ofcorr
ecti
ngdepr essionsandrecessions;t
hebailoutst
olarge
autocompaniesandbanksi nresponsetotherecentrecessi
on
areonesuchexampl eofgovernmentinvolv
ement .

Def
ini
ti
onofEconomi
cs
Ast hesci enceofdeci sion-making,economi cphilosophy
operat esinourdai l
yli
veswhet herwer eali
zeitornot .Whenwe
areev aluati
ngt heint
erestratesonourcr editcardsort r
yingto
decidewhet hert obuyorl easeanewcarorgooutt odi nneror
onv acat i
on,t hesearealldecisi
onswemakeusi ngeconomi c
thi
nking.Wel i
veinawor l
dofl i
mitedresources,andeconomi cs
helpsusdeci dehowt ouset heselimit
edi nputstosat isfyour
never-endingl istofwant sandneeds.Economi csi salsoal arge
fi
eldwi t
har ichhi st
orythat'
sbeenexpl oredandex ami nedby
hundr edsofi nf l
uenti
alpeople,rangi
ngf r
om phi l
osopher sto
polit
icians.
Init
smostsi mpleandconci sedefinit
ion,economi csist he
studyofhowsoci etyusesitsl
imitedr esources.Economi csisa
socialsciencethatdealswiththepr oduction,di
stri
bution,and
consumpt i
onofgoodsandser vi
ces.Economi csfocuses
heavilyont hefourfactorsofproduction,whichar eland, l
abor
,
capital,
andent erpri
se.Thesearethef ouringredient
st hat
makeupeconomi cacti
vi
tyinourwor ldtodayandcaneachbe
studiedindivi
dually.
Economi
csi
sspl
i
tint
othef
oll
owi
ngt
wobr
oadcat
egor
iesof
study
:
Economi
cTer
msandThei
rBasi
cConcept
s

Ever
ysciencef
ramesitsconceptsi
nuni
queter
minol
ogyanddevel
ops
i
tsownvocabular
y.Economicstoohasi
tsuni
quevocabul
ary
.–M.
Bober”

1.Ut i
li
ty:
Ut i
l
ity
,economi cwel
fare,
satisf
action,andsomet i
meshappi ness—
theset er
msar eoft
enusedi neconomi csinmor eorlessthesame
sense.Butt hi
sisnotcorr
ect.Infact,t
osayt hatsomeoneder iv
esutil
i
ty
from agoodsorser vi
ceistosayt hathepref er
sthegoodst oexist
ratherthatnottoexi
st.Tosayt hathederivesmor euti
li
tyfr
om goodX
thangoodYi ssimpl
ytosayt hatXi spref
erredtoY.Theconceptmay
nowbeex plai
nedindetai
l.

Humanwant scanbesat isf

iedbytheuseofmat er
ialobject
sorby
personalserv
ices.Thus,hungercanbesatisfi
edbyeatingbreadwhich
i
samat eri
alobject
.Thedesi r
eformusiccanbesat i
sfi
edbyhearinga
songsungbyasi nger.Whatamusi ci
anperformsi
saser vi
ce.Wemay
saythatbreadhast hepowert osati
sfyhumanwant s.

Soalsohast hemusician.Theterm ut
il
it
yisusedtodenot ethi
swant
-
sati
sfyi
ngpower ?Thus,uti
li
tymeanst hepowertosatisf
yhumanwant .
Suchpowerexi st
sinmat eri
alt
hingsandv ar
iousser
vices.Wemustnot
confusebetweenat hi
ngandi t
sut i
l
ity
.Breadisathi
ng.Br eadi
snot
uti
l
ity.I
thasutil
it
y.

Ut
il
it
yisanabstr
actidea.Someeconomist
sbeli
evet
hatitcannotbe
measur
ed.Accordi
ngtot hem,
iti
snotpossi
blef
oranypersontosay
‘
howmuch’ uti
l
ityhederi
vesfrom theconsumpti
onofapart
icul
arar
ti
cle.
Accor
dingtoothereconomist
s,i
tispossiblet
omeasureuti
l
ityi
nter
ms
ofmoney.Thus,ifamanispreparedtopay80paiseforasl
iceofbr
ead,
theut
il
it
yhederivesfr
om iti
smeasur edby80paise.

Alt
houghther eisadi f
ferenceinopini
onont hequest
ionswhet heruti
l
ity
i
smeasur able,alleconomi st
sareagreedthatiti
spossibl
ef oramant o
comparebet weent wot hingsandsaywhetheroneoft hem hasmor e
uti
l
ityt
hant heot herorless.Thus,i
tispossi
bleforamant osayt hathe
getsmoreut i
li
tyf r
om agl assoflemonadethanfrom aglassofwat er
.

Thesamet hingmayhav edif

ferentuti
li
ti
estothesamemanatdi f
fer
ent
ti
mes.Whenhei sver
yt hir
sty,aglassoflemonademaygivehim much
uti
li
ty.I
twi
llgivehimlessut i
l
itywhenhei slesst
hir
sty
.Thus,ut
il
it
y
vari
esaccordingtoti
meandci rcumstances.

Again,t
hesamear ti
clemaygivedif
ferentut
il
it
iest
odiff
erentpersons.A
personmaypreferlemonadetowater.Anotherper
sonmaypr eferwater
tolemonade.Uti
li
ti
esderiv
edandpr ef
erencesshowndependupont he
habit
sandtasteoft hei
ndiv
idual
.Theseideasareexpr
essedbysay ing
thatut
il
it
yisarelat
iveconcept.

Iti
stobenot edthattheterm ut i
l
ityinEconomi csi
swithoutanymoralor
l
egal i
mplicati
on.Dri
nkingwi neisimmor al
.Butmanymendesi retodr
ink
wine.Economi st
swillsaythatwi nehasut il
i
tybecauseithasthepower
tosati
sfysomemen’ swant .Arsenicisapoi sonwit
hwhi chamanmay
commi tsuici
de.Anysuicidalactisunl awful
.Butsomemenmaywantt o
havearsenic.Theref
ore,i
thasut ili
tyintheeconomicsense.

Dif
ferentKindsofUti
li
ty :
a.ElementaryorNaturalUti
li
ty:
Theut i
l
ityt
hatwegetf rom t
hingsobt
ainabl
efreefr
om nat
uremaybe
cal
ledelementaryornatural
util
it
y.Ai
randwaterhavet
hiskindofut
il
it
y.

b.Form Uti
li
ty:
Uti
lit
ymaybecr eat
edbychangingtheshapeofmatter.Whena
carpent
ermakesachairoutofapiecesofwood,hecreatesathi
ng
whichismoreusefult
oment hanpiecesofwood.Thistypeofut
il
it
yis
for
m util
i
ty.
c.PlaceUti
li
ty:
Uti
li
tymaybecr eatedbytr
ansfer
ri
ngat hi
ngfrom oneplacetoanot
her
.
Coal i
nAsansolisnotusef
ultoamanofCal cutta.Whenthecoali
s
tr
ansferr
edtoCal cut
tai
tacqui
resgreat
eruti
li
ty.Thist
ypeofuti
li
tyi
s
cal
ledplaceuti
li
ty.

d.TimeUt il
it
y :
Thesamet hi
ngmayhav ediff
erentuti
li
tiesatdiff
erenttimes.Theutil
i
ty
ofacommodi tyincreasesatcer t
ainti
mesanddecl inesatotherti
mes.
Thus,newdr essesf orchil
drengivemor eut i
l
ityduri
ngt hePujaseason
thanatothert i
mes.Bysuppl yingcommodi ti
esattheappr opri
ateti
me
uti
li
tyi
scr eated.Thistypeofut i
li
tyiscreatedbyshopkeeper sandothers
byholdi
ngov ert hi
ngsf r
om onepoi ntoft i
met oanot her
.

5.ServiceUt
il
ity:
Personalser
vicecanhavegreatut
il
it
y.Thus,
theworkofacookora
servantoratr
avelagentorabankercreat
esuti
l
ity
.Thi
siscal
ledser
vice
uti
l
ity.

6.PossessionUtil
it
y:Somepeopl ederi
vesat i
sfacti
onj ustbyhav
ing
somet hi
ng.Anindiv
idualhavi
ngthreewat chesmayf eelhappi
erthan
havingonlyone.Hemaynotev enuseallthewat ches.Hewaymay
simplyfeelhappybypossessingthem.
Util
ityFuncti
on:
Iti
saf uncti
onstati
ngthatanindivi
dual’
sut i
l
ityisdependentupont he
goodsheconsumesandt hei
ramounts.

 WhatI sUt il
it
y?
Util
it
yisat ermi neconomi cst hatref
erstot hetot
alsati
sfacti
on
recei
vedf rom consumi ngagoodorser vi
ce.Economictheories
basedonr ati
onalchoiceusual lyassumet hatconsumerswi l
l st
riv
e
tomax i
mi zethei
ruti
lit
y.Theeconomi cutil
it
yofagoodorser v i
ce
i
si mpor t
antt ounderstand, becausei tdir
ectlyi
nfl
uencest he
demand, andtheref
orepr ice, ofthatgoodorser vi
ce.I
npr acti
ce,a
consumer '
sutil
it
yisimpossi bletomeasur eandquant i
fy.Howev er,
someeconomi st
sbel i
evet hatt heycanindirect
lyesti
mat ewhati s
theutil
ityforaneconomi cgoodorser vi
cebyempl oyi
ngv ari
ous
model s.
  UnderstandingUt il
ity
Theutili
tydefini
ti
oni neconomi csi
sder i
vedf rom theconceptof
useful
ness.Aneconomi cgoody i
eldsuti
li
tytot heextenttowhi ch
i
t'
susef ulforsati
sf yingaconsumer ’
swantorneed.Var ious
schoolsoft houghtdi ff
erast ohowt omodel economi cutil
i
tyand
measur etheusef ulnessofagoodorser vice.Ut i
l
ityi
neconomi cs
wasf i
rstcoinedbyt henoted18t h-
centurySwi ssmat hemat i
cian
DanielBernoulli
.Sincet hen,economi ct
heor yhaspr ogressed,
l
eadingt ovariousty pesofeconomi cut
il
ity.

Or di
nalUti
li
ty
Itisrepr
esentingt
hepref
erenceofanagentonanordi
nalscal
ei t
claimsthatitismeani
ngf
ultoaskwhichopti
onisbett
ert
hanot herbut
i
ti smeaninglesst
oaskhowmuchbet teri
tisorhowgooditis

Earl
yeconomi stsoftheSpanishScholastictradi
ti
onoft he1300sand
1400sdescr ibedtheeconomi cv al
ueofgoodsasder i
vi
ngdirectl
yfrom
thi
spr opert
yofusef ulnessandbasedt heirtheori
esofpr i
cesand
monet aryexchanges.Thi sconcepti
onofut il
it
ywasnotquant i
fi
ed,buta
quali
tati
vepr opert
yofaneconomi cgood.Lat ereconomists,part
icular
ly
thoseoft heAust r
ianSchool,devel
opedt hisideaintoanordinalt
heor y
ofuti
lity
,ortheideat hatindi
vi
dualscouldor derorranktheusefulness
ofvariousdiscreteunitsofeconomi cgoods.

Aust ri
aneconomi stCarlMenger,i
nadi scoveryknownast hemar ginal
revoluti
on,usedt histypeofframewor ktohelphimr esolvethediamond-
wat erparadoxt hathadv exedmanypr eviouseconomi sts.Becauset he
fi
rstav ai
lableunitsofanyeconomi cgoodwi l
lbeputtot hemosthi ghly
valueduses, andsubsequentuni tsgot olower-v
alueduses, thi
sor dinal
theor yofutil
it
yisusef ulf
orexplai
ningthelawofdi minishingmar ginal
1
uti
lityandf undament aleconomiclawsofsuppl yanddemand.

 Car dinalUti
li
ty
Economicwel f
arecanbedirect
lyobserv
ableandbegi
v enval
uef oreg
peopl
emaybet oexpresstheuti
li
tyt
hatconsumpti
ongi v
esforcert
ain
goodsforgNi ssancargi
ves5000unitswhereasBMW carwouldgives
8000units.

ToBernoul
liandothereconomist
s,ut
il
it
yismodeledasaquant i
fi
abl
eor
car
dinalpr
opertyoftheeconomicgoodsthatapersonconsumes.To
hel
pwi t
hthisquanti
tat
ivemeasurementofsat
isf
action,
economist
s
assumeauni tknownasa“ uti
l”torepresenttheamountof
psychol
ogicalsati
sfacti
onaspeci fi
cgoodorser vi
cegener
atesfora
subsetofpeopleinv ari
oussit
uations.Theconceptofameasurableut
il
makesitpossibletot r
eateconomi ctheoryandrel
ati
onshi
psusi
ng
mathematicalsymbol sandcalculati
ons.

However,itseparat
esthetheoryofeconomicutil
i
tyfrom act
ual
obser
vati
onandex peri
ence,si
nce“uti
l
s”cannotactuall
ybeobserv
ed,
measured, orcomparedbetweendiff
erenteconomicgoodsorbetween
i
ndivi
duals.

If,
forexample,anindi
vi
dualjudgesthatapieceofpizzawi l
lyi
eld10
uti
lsandthatabowl ofpastawillyi
eld12util
s,t
hatindi
vidualwil
lknow
thateati
ngthepastawill
bemor esati
sfyi
ng.Fortheproducersofpizza
andpasta,knowingthattheaveragebowl ofpast
awi l
lyi
eldtwo
addit
ionalut
il
swi l
lhel
pthem pricepastasli
ghtl
yhigherthanpizza.

Additi
onall
y,uti
lscandecreaseasthenumberofpr oductsorservi
ces
consumedi ncreases.Thefi
rstsl
iceofpizzamayy i
eld10ut i
l
s,butas
mor epizzaisconsumed, t
heutil
smaydecr easeaspeoplebecomef ul
l.
Thisprocesswi l
lhelpconsumersunderstandhowtomaxi mizethei
r
uti
l
itybyallocati
ngtheirmoneybetweenmul ti
plet
ypesofgoodsand
servi
cesaswel lashelpcompaniesunder st
andhowt ostructur
eti
ered
pri
cing.

TheDef i
nit
ionofTot alUtil
ity
Ifutil
i
tyineconomi csiscar di
nal andmeasur able,thet
otaluti
li
ty(TU)is
definedast hesum oft hesat i
sfactionthatapersoncanr eceiv
ef rom
theconsumpt ionofal lunit
sofaspeci fi
cproductorserv i
ce.Usingthe
exampl eabov e,i
faper soncanonl yconsumet hreesli
cesofpi zzaand
thef i
rstsl
iceofpizzaconsumedy ieldstenuti
l
s, t
hesecondsl i
ceof
pizzaconsumedy iel
dsei ghtuti
ls,andt hethi
rdsliceyi
eldstwout i
ls,t
he
totaluti
li
tyofpizzawoul dbet went yutil
s.

TheDef i
nitionofMar ginalUtil
it
y
Mar ginalutilit
y(MU)i sdef i
nedast headdi t
ional(
cardinal)ut i
l
itygai ned
from theconsumpt i
onofoneaddi ti
onal unitofagoodorser v
iceort he
additi
onal (or di
nal)uset hataper sonhasf oranadditional uni
t.Usi ng
thesameex ample,i
ft heeconomi cutil
i
tyoft hefi
rstsl i
ceofpi zzai st en
util
sandt heut il
i
tyoft hesecondsl i
ceisei ghtuti
l
s, t
heMUofeat i
ngt he
secondsl icei seightut i
l
s.Iftheut il
it
yofat hi
rdsli
cei stwout il
s, t
heMU
ofeat i
ngt hatt hi
rdsliceistwout ils.Inordinalut
il
ityterms, aper son
mi ghteatt hef i
rstsli
ceofpi zza,shar ethesecondsl icewi ththeir
roommat e, savethethi r
dsliceforbr eakfast,anduset hef ourthsliceas
adoor
stop.

 Uti
li
ty,
ineconomi
cs,r
efer
stotheuseful
nessorenj
oymenta
consumercangetf
rom aser
viceorgood.

 Economicuti
l
itycandecl
i
neast
hesuppl
yofaser
viceorgood
i
ncreases.

 Margi
naluti
l
ityi
stheut
il
it
ygai
nedbyconsumi
nganaddi
ti
onal
uni
t
ofaserv
iceorgood.

2.Goods:Ourwant saresati
sfi
edbygoodsandser vi
ces.Goods,
commoditi
es,productsorarti
clesr ef
ertomat er
ialobj
ects.
Goodsref
ertot angibl
ecommodi t
ieswhi chcontr
ibut
epositi
vel
yto
consumerwelfare.Theseusedi st
inguishedfrom

Servi
cesar enonmat eri
al;t
heyr epresenttheactionsofindiv
iduals,l
ike
medicalexaminationofapat ientbyadoct or
,songofasi nger,ora
l
ecturebyapr ofessor.Thecapaci t
yort hequalit
yofagoodorser v
iceto
sat
isfyawanti scall
edut i
li
ty.Util
i
tydenot estheimportance/the
si
gnif
icance,ortheusef ul
nesswhi chwef indinagoodori naser vi
ce.

Theterm goodsi susedi nordinarylanguagetomeanphy sicalthi

ngs
whichareboughtandsol dinthemar ket
.InEconomi csthet er
mi sused
i
nawi dersense.Goods, i
nEconomi cs,meanany t
hingwhi chhast he
powertosat isf
yhumanwant s, or,
inotherwords,any t
hingwhi chhas
uti
l
ity
.Thus, theter
mi ncludesmat eri
alt
hingsl
ikerice,bread,clot
h, et
c.
I
talsoincludesnon-mat eri
althingsliketheser
vicesoft hedoct or
,lawyer
andmusi cian.

Classifi
cat i
onofGoods:
Goodscanbecl assif
iedi nvari
ousway sasf ol
lows:
a.Mat erialandNon- mat eri
al:
Rice,veget abl
es,books, houses,water,ai
r,etc.
,ar
eexampl esofmater
ial
goods.Theser vi
cesofadoct or,thegoodwi l
lofabusiness,et
c.,
are
exampl esofnon- materialgoods.Thet reat
¬mentofapat i
entbyadoctor
,
thedeliveryofalecturebyapr ofessororthesingingofasongbya
singerarecal l
edservicesi nEconomi cs.

b.Ext
ernalandI
nter
nal
:
Phy si
calthi
ngsareexternal t
omenandar ecall
edexter
nal goods,e.g.
,
furnit
ure.I
nter
nalgoodsar equali
tieswhichenableaper sontoperform
aser vi
ceandt her
ebysatisfyahumanwant .Themusicianhascer t
ain
qualit
ieswhichenabl
ehi mt ogivepleasuretootherhumanbei ngs.
Thesequal i
ti
esaresomet imescal l
edinter
nalgoods.Someeconomi sts
prefertocalli
nter
nalqualit
iespersonalcapi
tal
.

c.Tr
ansferableandNon- t
ransferabl
e:
Theowner shi
pofgoodsl i
kehouses, agri
cult
uralfar
ms,furni
tur
e,et
c.
canbetransferr
edf r
om oneper sontoanother.Theyar
ecal l
ed
tr
ansf
erablegoods.Therearety pesofgoodswhi chcannotbe
tr
ansf
erred,e.g.
,themusici
an’sabili
tyorthedoctor’
sski
ll.

Theyarecall
ednon-transf
erablegoods.I
tistobenotedthatbytr
ansfer
wemeant r
ansferofownership.Physi
caltr
ansf
erabi
li
tyfr
om oneplace
toanotheri
snotnecessary.Thus, anagr
icul
tur
alfar
mi str
ansf
erable
alt
houghitcannotbemov edf rom onepl
acetoanother.

d.FreeandEconomi cGoods:
Somegoodsr eadyforusearesuppl iedbynat
ur ei
nsuchabundance
thatnoonehast omakeanysacr if
iceinmakingmor euseofthem.
Thesegoodsar enotscar
ceinr el
ationtowants;suchgoodsarefree
goods,becausemanyoft hem arenotboughtandsol d.Sot
heyhav eno
pri
ce.Theycreatenoeconomicpr oblemsandt heyar
enotstudiedin
economicanalysi
s.

Examplesoff reegoodsar eair

,sunshi
ne, wil
dflowersi nthewoods.I n
today’
swor ldtherearefewfreegoods.Mostgoodsar eeconomi cgoods,
goodsscar ceinrelat
iontohumanwant sand,therefore,boughtandsol d
ataprice.Economi cgoodsmaybepr ovidedbynat ure,withouteff
orton
ourpart.Examplesar eland,
oresandoi lunder-
ground, orvir
ginforests.
Butmosteconomi cgoodsembodyi nthem agooddeal ofhumanef fort
,
asdoescoal i
nthebinoft hecoaldealer
, i
ce-
¬cream, machi nery,
or
houses.

Agoodmaybef reewhennotscarceandaneconomicgoodassoonas
i
tsamountbecomesli
mitedinrel
ati
ontohumanwants.Thefr
eeland
occupi
edbythepeopl
eatthedawnofcivi
li
sat
ionsoonbecamean
economicgood.
Infact,t
hesamear ti
clemaybef reeatonepl acewhil
ei tisnotfreeat
otherplaces.Drinki
ngwaterisfr
eebyt hesideofariver.Itisnotfr
eeina
townl i
keCal cut
tabecauseithast obestoredintanks, chlori
nat
edand
thenpumpedoutt othedi
ff
erenthouses.Goodswhi char einabundant
supplyareusuallyfreegoods,e.
g.,air
.Goodswhi char escar cei
n
rel
ationtothedemandar egenerall
ynotf r
ee.Economi cgoodsar ealso
call
edweal th.

e.ConsumerGoodsandCapi talGoods:
Somegoodsy i
eldsati
sf acti
ondi r
ectl
yast heconsumerusest hem,as
doesbreadoraMar ut
i car.Thesear ecall
edconsumergoods.Ot her
goodshelpproduceconsumergoods.Theyar enatur
al r
esources,raw
materi
als,
tools,machines, offi
cebuildi
ngs.Ofthese,thegoodsmadeby
menar ecall
edcapitalgoods, andthosepr ovi
dedbynat ure,
suchas
for
ests,miner
als,andanyot hernatural
resources,ar
ecalledland.

Theautomobil
eusedbythephysi
cianwhiledoinghi
sdut yi
sacapital
good.Thesameautomobilewhenusebyt hephysi
cianforapl
easure
tr
ipisaconsumergood.Theaggregateofeconomicgoodsinexi
stence
i
nacommuni t
yconst
it
utesit
swealth.Thi
sconceptdoesnotincl
udeany
serv
icewhichi
salsoaneconomicgood.

3.ResourceAllocati
on:
Whenpur chasi
ngr awmat eri
als,employingl
abourandundertaki
ng
i
nvestment,thebusinessfirm ortheproduceri
sinvol
vedinresource
al
locat
ion.Society
’sresourcesare,inevi
tabl
yscarcesothatt
he
i
ndivi
dualfir
m hast opayforthem.

Deci
sionsneedt
obemadeatthr
eelev
els,namely:
i
.Whatgoodsandser
vicest
opr
oducewit
ht heav
ail
abl
eresour
ces;

i
i.Howtocombinetheavai
l
abl
eresour
cest
opr
oducedi
ff
erentt
ypesof
goodsandser
vices,
and

i
i
i.Forwhom t
hedi
ff
erentgoodsandser
vicesar
etobesuppl
i
ed.

Fi
gure1.1ill
ustr
atestheinter
rel
ati
onshipbet weentheproducti
on
deci
sionanddecisionsregardi
ngtheset hreefact
ors.Suchdecisi
onsar
e
sometimesdescribedast heall
ocat
ive,producti
veanddistr
ibuti
ve
choi
ces,respec¬ti
vel
y,whichfacesocietyingeneral.I
nbusiness
economicsweexami
nehowt
hepr
icemechani
sm r
elat
est
omaki
ng
thesechoi
ces.

Traditi
onall
y,t
hepr i
cemechani sm hasbeenseenast hemaj or
determinantofthewhat ,howandf orwhom decisions—especi all
yin
mar keteconomi es,thoughlesssoi ntheformerl
ycent r
all
yplannedor
commandeconomi esofEasternEur ope.However,overti
mei nall
economi esfir
mshav egrowni nsizeandi mport
ance–wi t
nessf or
exampl eresourceal l
ocationwhichgoesonwi thi
ncompani essuchas
IBM, I
CIandToy ota.

Resourceswithi
nfir
msar eall
ocatedbybot hcommandandpr ice.For
example,adecisi
ononwher etolocat eplantcouldbebasedupon
detai
l
edcost i
ngofalter
nativ
esit
es( price).Al
ter
nativ
ely,
thedecisi
on
mightbemadebymanagementont hebasi sofnon-pri
cefact
ors,which
mayinf actbepurel
ysubjecti
ve(‘
ani ceareaoft hecountr
ytoli
ve’)
.

X-Effi
ciency:
Thistermr ef
ertoasit
uati
oninwhichafi
rm’stot
alcostsarenot
minimisedbecausetheactualout
putf
rom gi
veninput
sislessthan
maximum l evel
ofoutputt
hatcanbeproducedbyimprovi
ngtechni
cal
effi
ciencyofthepr
oductprocess.

4.Weal
th:
Weal
thmeanseconomi
cgoods.Fr
eegoodsar
enotcount
edasweal
th.

I
neconomi
csany
thi
ngwhi
chhasmar
ketv
alueandcanbeexchanged
formoneyorgoodscanber egardedasweal t
h.I
tcanincl
udephysi
cal
goodsandassets,
financialassetsandpersonal
skil
l
swhichcan
generateani
ncome.Thesear econsideredtobewealthwhentheycan
betradedint
hemar ketforgoodsormoney .

Themeaningoft heterm wealthcanbef urt

heranaly
sedasf ol
lows:
Wehav et
hatgoodsar ear t
icl
eshavingthepowertosatisfyhuman
wants.Al
lgoodshav eutil
i
ty.Wealthisaclassofgoods.Therefore,i
n
ordert
obecalledweal t
hanar ti
clemusthav eut
il
it
y.Again,f
reegoods
ar
enotwealth.Therefore,weal
thconsistsofthi
ngswhichar escarce.

Ut i
l
ityandscar ci
tyarethetwomostimpor tantcharacteri
sticsofwealt
h.
Inaddi ti
on,wealthmustsatisfyt
woot hercharact
eristi
cs.Itmaybe
transferabl
eandi tmustbeext er
nalt
oman.I fanarticl
eisnotexternal
,
orifitisnottransfer
able,i
tdoesnotcomewi thi
nthecat egoryofgoods
and, theref
ore,cannotbecalledweal
th.

Char
acteri
sti
csofWeal t
h:
Thi
scharac¬ter
ist
icsofwealtharethefol
lowing:
a.Wealt
hhasut i
li
ty:
Athi
ngwi t
hoututi
li
tyisnotgoodsand,hence,i
snotwealth.Nobodywi
l
l
i
ncuranycostforthepurposeofobt
aini
ngat hingwi
thoututi
li
ty.

b.Wealt
hconsistsofscar cegoods:
Nobodywil
lpayany thi
ngforsomet hi
ngwhi chcanbeobtai
nedfr
eefr
om
nat
ure.Whenat hingisscarce,i
tisnecessarytopaymoneyori
ncur
l
abourfort
hepur poseofget t
ingit
.Onlyscarcegoodsar
ecall
edwealt
h.

Itmustbenot edthatscarcityisarelati
veterm.At hi
ngmaybescar cein
somepl acesortimeswhi leitisf
reei notherplacesandt imes.Theair
thatweor di
naril
ybreatheisav ai
l
ablewi t
houtanycost .Buttheairt
hat
webr eathei
nanai r-
conditi
onedci nemahal lhastobepumpedi nand
outatacost .Suchairisnotf r
ee.Ithasacostwhi chisincludedinthe
pri
ceoft hecinemat i
cket.Itcan,t
herefore,becalledweal t
h.

c.Wealt
histransfer
able:
Athingwhichcannotbetransfer
redfr
om onepersontoanotherisnota
goodandtherefor
enotweal t
h.Theabil
it
yofamusi ci
ancannotbe
tr
ansfer
redtoanother.I
tisnotwealt
h.Butahouse,aplotofland,t
hings
l
ikerice,furni
ture,etc.
,canbet ransfer
redfr
om oneper sontoanother.
Theyar e,ther
efore,weal t
h.I
ti stobenotedthattransf
ermeanst r
ansfer
ofowner ship,nottransferfr
om onepl acetoanother.Never
thel
ess,iti
s
wealthbecausei t
sowner shipcanbet ransf
err
edandi tpossessesthe
otherfeaturesofweal th,vi
z.,uti
li
tyandscarci
ty.

d.Weal thisexternalt
ohumanbei ngs:
Aninternal qual
it
yisnott r
ansferableandi s,
theref
ore,notwealt
h.The
healt
hofaman, theskil
lofamusi cian, t
hedexteri
tyofanarti
stor
doctor,etc.,ar
eofgreatutil
it
yt otheirpossessorsandar eal
soscarce;
butsincet hesearenott r
ansferabl
e, t
heycannotbecal ledwealt
h.In
ordi
naryl anguage,weof t
ensayt hatheal t
hiswealth;butinEconomics
wecannotcal li
twealth.I
nternalqualit
iesaresomet i
mescal l
edpersonal
capit
albecauset hepossessionofgoodqual i
ti
esenablesamant oearn
anincome.

Therearesomenon- materi
algoodswhichshowal l
thecharacter
isti
cs
ofwealth.Forexample,wemayci t
ethecaseofthegoodwi l
lofaf i
rm,
whichmeanst hereputation(orgoodname)whichitmayhav eacqui r
ed
i
ncour seofbusiness.Thegoodwi l
lcanbesold.I
tcan,t
herefore,be
descri
bedasweal th.Thus,wealthmaybemat eri
alaswellasnon-
materi
al.

Weal
thcanbesubdi
videdi
ntot
womai nty
pestangi
ble,whi
chinr
efer
red
t
oascapit
alornon-
humanwealt
h;andint
angi
blewhichishumancapi
tal
.

Seechar
tbel
ow:

Allwealt
hhasonebasi cpr
operty—i tcangenerateincome.Soi ncome
i
st hereturntowealt
h.Thusweal t
hi sastock,butincomei safl
ow.A
stockvariabl
ehasnot imedimension,butaflowv ariabl
ehassucha
di
mensi on( i
.e.
,somuchperper i
od).Forexampl e,
y ourfi
xeddepositi
na
bankisast ock.Buttheannuali
nterestthatyougeti saflow.(
The
presentvalueofthi
sincomef l
owconst it
utestheval ueofthest
ockof
wealth.
)
WealthandWel fare:
Wealthissimplyastockofgoods.Wel f
areistheder i
vati
onof
sati
sfact
ionfrom possessi
onofwealth.Thev er
ypossessi onofahuge
amountofweal thmaymakeamanpsy cho¬logi
callyhappy .Butan
i
ncreaseinwealthdoesnotnecessaril
yimplyani ncreaseinwel f
are,
becausewelfaredependsuponahostoff actors—economi candnon-
economic—ofwhi chwealt
hisjustone.

Quit
ether ev
ersecouldconceivabl
yresul
t.Amanpossessingwealthof
Rs.3lakhsisnotnecessari
l
yt hri
ceashappyasamanwhoownsonl y
Rs.1lakh.Economist
slikePigou,however,
areoftheopi
nionthat
i
ncreaseinwealthi
ncreaseswel f
areandadecreaseini
timpli
esaloss
ofwelfar
e.

Butevenf rom t henat i

onal poi ntofvi
ew,anincreasei nwealthmaynot
i
ncreasewel fare.Ifafactoryi sestabl
ished,newpr oduct i
onwillbe
generatedandsoweal thoft hecommuni t
ymayi ncreasei ntheprocess.
Butthef actor ymayemi tsmokeanddi r
tandmayi ncr easethelaundry
chargesoft hepeopl eresidingi ntheareaandreducet hei
rwelfare.I
t
mayal sor educet hepr i
ceofl andintheadjoini
ngar easbycausi ng
si
tuati
onal disadvantage.

Likewiseani ncreaseinincomedoesnotal waysbr i

ngf orthanincrease
i
nwel fare.Thecol l
eget eacher,
whobecomesaf actorymanager ,may
hav elargerincomebutnotmor ewel fare.Or,contr
aril
y,amanwho
resignshi spostofanengi ne-dr
iveronmedi caladvi
ceandt akesupa
cleri
cal j
obel sewher ehasasmal l
erincomebutani n¬cr easedwel f
are.
Wel fareinitselfisahighlyabstractterm, whichisdiff
iculttodefi
nei n
preciset erms.Yett heincreaseofwel fareisofparamounti mportancein
anysoci ety.

WealthandCapi t
al:
Wehav esai
dear l
ierthatweal t
h,i
necono¬mi cs, r
eferstoast ockof
economicgoods.Fur t
hermor e,wealt
hi srefer
r edtoasaccu¬mul ated
i
ncome.Thus,weal thisastockconcept .Forinstance,anindivi
dual’s
wealthi
sregardedast hestockofal leconomi caswel lastr
ansf er
able
goodspossessedbyhi m.Ont heotherhand, capitalmaybedef i
nedas
thatpar
tofanindivi
dual’sstockfrom whi chheexpect stoderiveany
i
ncome.
So,capitali
salsoast ockconcept .Butt hereisonef undament al
dif
ferencebetweenweal t
handcapi tal.Capit
alisdefinedasthepar tof
wealthorstockofmat er i
algoodswhi chf aci
li
tatet
hepr oducti
onof
goodsorweal th.From t hisdefi
nit
ion,wecansayt hatweal t
hher eserves
asanagentofpr oduction.Nodoubt ,acarownedbyadoct orishis
wealth,butonceheusesi tf
ordoct ori
ngt oearnmor eweal t
ht henthi
s
carbecomescapi t
al.Thus, all
weal thisnotnecessar i
lycapit
al butal
l
capit
al i
swealth.

Income:
Income,too,shouldbevieweddif
fer
entl
yfrom wealt
h.Weal
thi
sa
coll
ecti
onofgoodswhi l
eincomeisafl
owofut i
li
tycreat
edbymanand
wealthduri
ngacer tai
nperiodoft
ime.Thus,wealt
hisastor
eofut
il
it
y
andincomei saflowofut i
li
ty.

Letusill
ustr
atethepointbysomeexampl es.Thehousewel i
v eini
s
wealth,
buttheutil
i
tyweder i
vefr
om t hathousebyl i
vi
nginityearafter
yearisi
ncomet ous.Again,i
faper sonownsamot orcar
,itiswealthto
him;buttheservi
cethathegetsfrom thecari si
ncometohim.Si mil
arly
,
divi
dendsareincome,whileshar
esar eper sonal
wealth(
capital)
.

Ani ndivi
dualusual
lydist
ributeshist
otalwealthamongt wot y pesof
asset smoneyandbonds( shareofcompani es).Ashareistobe
disti
nguishedfrom astock—apar ti
cul
artypeofsecurity
, usuallyquoted
i
nuni t
stoRs.100v alueratherthani
nunitsofpr opor
ti
onoft ot alcapit
al,
asi nshares.Theterm st
ocki snowcomi ngt omeanexcl usivelyafixed
i
nt erestsecur
it
y,i.
e.,
loanst ockinacompanyorl ocalorCent ral
Gov ernmentstock.

Peoplederi
veincomenotonl yfrom wealthbutal
sof r
om v ar
iousnon-
materi
alsources.Doctor
s,teachers,l
awy er
s,f
il
m-star
s, andother
salso
sat
isfyourwantst hr
oughtheirservi
ces.Theseservi
cesshoul dal
sobe
i
ncludedwithi
nt heconceptofincome.Thus, t
herealincomeofaper son
i
stheamountofgoodsandser viceswhichhegetsdur i
ngacer t
ain
per
iodoftime.

Inthi
scontexti
tisworthwhil
etoremembert hatchangesinmoney
i
ncomesdonotal way simplychangesinthereal
incomesorin
economiccondit
ion.Forexample,supposeaperson’si
ncomeincr
eases
two-fol
dandthepricelevelal
sor i
sestwo-
fol
d.Asar esultoft
hisupward
mov ementofthepricelevel
,theeconomiccondit
ionofthatpersondoes
notchange,i
.e.
,inspit
eofani ncr
easei
nhisincome,hiseconomi c
conditi
onremainsthesame.

Thus,realincomedependsonmoneyi ncomeont heonehandandon

pri
celev el
,ont heother.Duri
ngthel
astfivey
ears,moneyincomesof
mostofushav eincr
easednodoubt ,
butduet oageneral
risei
nthepr
ice
l
evel,
oureconomi ccondit
ionhasnotimproved,
andinsomecasesit
hasdet eri
orated.

Nati
onalIncome:
Theimportanceofnational i
ncomeaccounti
ngstemsfrom the
i
mportanceofkeepingt het r
ackofnati
on’
seconomicgrowth.Thi s
soci
alaccounti
ngat t
empt stopresentacompre¬hensi
vepi
ct ureofthe
worki
ngofaneconomy ,showinghowtheinhabi
tant
searntheirincome,
howtheyspendi tandwhatt heyproduce.

Nati
onali
ncomeaccount i
ngiscrucialtoeconomicplanni
ngandt he
f
ormulati
onandappr ai
salofpoli
cies,andisofusei
nt heconstruct
ionof
afai
randequitabl
etaxsystem andt hedevel
opmentofsoci al
and
welf
areserv
icessuit
edtotheneedsoft hecount
ryconcerned.

Whati sNati
onal I
ncome?
Goodsar eproducedbymenwor ki
ngonnaturalresour
ceswiththeaidof
machinesandt ools.Thus, t
heagri
cult
uri
stproducesri
ce,wheatand
othercropsbycultivati
nglandwiththeai
dofseeds, manure,
ploughs,
etc.Themanuf act
ur erproducesvar
iousart
icl
eswi t
htheaidoflabour
,
capit
alandot herf
act orsof,pr
oducti
on.

Bypersonal eff
or tmanykindsofser vi
cesar epr
oduced, e.g.
,thoseof
thedoctor,
lawy er,ar
tist
,etc.Trader
spr oduceuti
li
tiesbyar r
angingfor
thesaleofgoods, Tr
ansportwor ker
smov egoodsfr om oneplaceto
anotherandt herebyaddv alues.Theresultofal
ltheseact i
vi
tiesappear
s
i
nt heform ofaf lowofgoodsandser vi
ces.

Thesegoodsandserv
icesareavail
abl
etothepeopl
eofthecountr
yf or
useandenjoy
ment.Theaggregateamountofgoodsandser
vicesthati
s
producedi
nacountr
yduringacertai
nperi
odofti
meiscall
editsnati
onal
i
ncome.I
tisal
sopossi
blet
odef
inet
het
ermi
ntwoot
herway
s.

Theyar edescr i
bedbelow:
Thegoodsandser vi
cesproducedinacount r
yultimatel
yreacht he
handsoft hepeopl eproduci
ngthem intheform ofincome.Letust ake
theexampl eofpr oducti
oninfact
ory.Producti
onnecessitat
est heuseof
fourfactor
sl abour,l
and,capi
tal
,andorganisati
on.Labourersmustbe
employ ed,andappr opr
iat
esitemustbechosenf orthel
ocationofthe
fact
ory.Capi t
alisalsotobeobtained.

Thet hr
eef actors—l and,labour,andcapi tal —mustbeor ganisedand
managedbybusi nessleadersorent repreneur swhomustal sobeart he
ri
sksofpr oduct ion.Theear ningsoft hef actory,asar esul
tofpr oducti
on,
mustnecessar il
ybedi v
idedintof ourpartst helabour swil
lgetwages,
thel
andlor dsr ent,theowner sofcapi tali
nt erest
, andtheentrepreneurs
prof
its—t her esidual.Thus, thr
oughal l
kindsofpr oducti
veact i
vit
iesin
thecount r
y ,peopl eareearningincomesi nt hefor m ofwages,rent,
i
nterest,andpr of i
ts.Thesum- t
otalofsuchi ncomesi stheaggregate
i
ncomeoft hecount r
y,i
.e.
, i
tsnational i
ncome’ .

Tabl
e1.1giv
esIndi
a’snat
ionalandpercapi
tai
ncomef
igur
esf
or
sel
ectedy
ears:

Incomesr eceivedbythepeoplearepartl
yconsumedandpar t
lysav
ed.I
n
otherwords, apartofthegoodsandser vi
cesproducedi
sconsumed
andapar tisusedf orthepurposeofbuil
dingnewmachinesand
equipmentofr epair
ingtheexist
ingones.I
fweaddt hetot
alamount
consumedt othetotalamountsaved,theaggregat
emustbeequalto
thenati
onal income.

Theforegoi
ngdi scussi
onmakesitcleart
hatt
henati
onalincomecan
beviewedfrom threeangles:
(1)I
tcanber egardedasthesum-
totaloft
henati
onal
products.
(
2)I
tcanber
egar
dedast
heaggr
egat
eofi
ncomesr
ecei
ved.

(3)I
tcanberegar
dedastheaggr
egat
eoft
henat
ional
out
lay
son
consumpt
ionandsavi
ng.

Producti
on:
Attherootoft
heeconomi ceffort
sliest
heurgetosatisf
ywants.Nature
hasendoweduswi t
hmanygi f
ts.Insomecases,thesegif
tsofNature
sati
sfyourwant
sdirect
ly.Thus,weconsumesunl i
ghtandairdi
rectl
y.
Butinmostcases,
thegiftsofNat ur
ecannotsat
isfyourwantsdir
ectl
y.

Wer equi
refood,fur
niture,
houses,tr
anspor
t,booksandvar
iousother
goodsforthesatisf
actionofourwants.Naturedoesnotgi
veusthose
goodsdirect
ly.Theartofproducti
on

i
snecessaryt omaket hesegoodsav ai
l
ableforuseandenjoy
ment .Man
sati
sfi
eshiswant sbytransfor
mingnaturalgi
ftsi
ntoeconomical
l
yuseful
goods.Naturehasgivent r
eesandplantsinthefor
ests.Mangetswood
fr
om theforestandmakesf ur
nit
ureoutofit.

Agai
n,Nat urehasendowedmenwi t
hmanyr iver
s.Man, byappl y
inghi
s
ener
gyandski l
l,const
ruct
sdamsandusest hewat erfort
hepr oducti
on
ofhydro-el
ectri
cityandfori
rr
igati
on.Nat urehassuppliedland.Man,by
hi
sefforts,producesfoodandot hercr opsf r
om land.Sopr oducti
on
meanst hecreationofusefult
hings, i
.e.,thi
ngshav i
ngutil
i
t y.Pr
oducti
on
can,
therefore,bedef i
nedasthecr eationofut i
li
ty.

Landuse

Thebook'saimi stodr awt ogethertheeconomi csl i

terat
urerelat
ingto
planni
ngandseti toutsy stemat i
cal
ly.I
tanalysest heeconomi csofland
useplanningandt her elati
onshipbet weeneconomi csandpl anni
ngand
addressesquesti
onsl i
ke: Whatar etheli
mitsofl andusepl anningand
theextentofit
sobj ectives?;Istheaim aestheti
c? ;
Isi tef
fi
ciency?;I
sitto
ensureequity?
;Orsust ainabi
li
ty?;Andifall
oft heseai ms,howshoul d
onebebal ancedagai nstanot her?

dai
lycommut ingisasigni
ficantcauseofener
gyusei nanewt own.
Avai
lablel
it
eratureshowsthatthereisastr
onglinkbetweenlanduse,
soci
o-economi cchar
acter
isti
csofpeopleandtraveldemand.Inthi
s
arti
cle,t
hepar all
elandi nt
err el
atedinfl
uenceoft hesefactorsont rav
el
demandi nanewt ownwi l
l bedi scussed.Landusei nthisresearchwill
best udiedt hroughmai ntrav el
-generati
nguses( suchaswor kplace,
educat i
onal facil
it
y,shoppingar eaandr ecr
eati
onal f
acil
ity
)onl ocaland
regional scalesandaccessi bil
i
tyt omainactivi
tycentres(suchas
neighbour inganddi stanttownsandci ti
es).Importantsocio-economic
char
acteri
sti
csst
udi
edherear
ethenumberofwageear
ner
s,t
rav
elmodechoi
ceand
tr
avelbehavi
ouri
nahousehol
d.

Resear cht oolsusedher ear equest ionnaires,fiel

dt r
ipsandi nterv i
ews.St at i
sti
cal
softwar e(SPSS)wasusedf ordat aent r
yanddescr iptiveanal y
si s.Basedon185
questionnai resf rom theNewTown( eachr epresentativeofonehousehol d)
suppor tedbyi nt erv
iewsandr ef
erencet osi milarrecentr esearch, t
her esultssuggest
thatbot hland- usepat ternandsoci o-economi cchar act er
isti
csi nfluencet ravel
demand.Land- usepat t
ernwasst udiedonsmal l,middle-sizedandl argegeogr aphic
scales.Thest udyshowst hatonami ddlet olargescal e,thelocat ionoft heNew
Towni npr oximi t
ytoexi sti
ngact i
vit
ycent res,whi chpr ovi
dej oboppor tunitiesforthe
i
nhabi t
ant s,woul dreducet hedi stancest ravell
eddai lyforwor k.Onasmal l t
omi ddle
scale,ami xtureofl andusest opr ovideeducat ionalandshoppi ngf acil
it
ieswi ll
decreaset heneedf orlong-distancecommut i
ng.Amongt hesoci o-economi cfactor
s,
carowner shipr ate,incomeandhousehol dcomposi tionandchar acteri
stics
i
ndicatingt henumberofwor kersandst udentsi naf ami l
ycoul di nfl
uencet he
dist
ancet ravelledandmodeoft ravel ofeachf ami l
ymember .

Pr
omot
ingEconomyi
ntheBui
l
tEnv
ironment

1.
2.2.Bui l
di ngs-Bui l
tEnv ironment Oper ational domai nofpr ofessionsof
Ar chi t
ect ur e/Engineer i
ngr evolv esar ound: - -planni ng,desi gning,const ruct i
on,
oper ati
on, mai ntenanceandcr eat i
ngst ateofar tbui ltenvironment . Bui ldingsar e
knownt obe - -consumer sofener gy - -consumer sofr esour ces, - -gener at orsof
wast eand - -polluterofenv i
ronmentandecol ogy Bui ldingsl argelyr esponsi blefor
global war mi ng/pol lution. Bui l
dingsal socostl otofmoneyt oconst ructbesi des
manpowerandmat erial Eachbui l
di nguni que, requi r
esdi fferentopt i
onst opl an, design
, const ructandmanage•Aspr ofessi onal s, wehav ei mpor tantr ol
e/ responsi bil
ityto
makev alueaddi ti
ont o•r esour ces, •env ironment•ecol ogyandcostofbui l
dings•by
creat ing•sust ainablebui ltenvironmentand•maki ngbui ldingeconomi cal andcost -
effect ive
3.3.I mpor tanceofBui ltEnv i
ronment Const ructi
oni ndustry: - -ani mpor tanti ndicator
ofdev el opment - -cr eatesinv estmentoppor tuni t
iesi nothersect ors-Housi ng
Const ruct ionl everages290I ndust ries I ndust ryf ragment ed,wi thhandf ul ofcompani es
i
nv olvedi nconst r
uction I n2011- -sl ightlyov er500const r
uct i
onequi pment
manuf act uringcompani esinIndi a. 120, 000cl assAcont r
act orsregist er edwi thvarious
gov ernmentconst ructionbodi es. I naddi ti
on, thousandsofsmal lcontr act orscompet e
forsmal ljobsorwor kassub- cont ract ors. Tot al salesofconst r
uctioni ndust r
ydoubl ed
i
n2004-05f rom 2000- 01wi t
hal most20%cont ribut edbyl argecont r
act s .
4.4.I ndi anBui l
di ngSect or Const ruct ion- -maj oreconomi cdr i
v eri nI ndi a(6%shar eof
GDP, empl oy ing35mi lli
ons( 1/ 6t hwor kingpopul ation)i n2011- 12 I ndi awoul dneed
around76. 5mi ll
ionwor ker si nt hebui lding, const ruct ionandr eal est at esect orby2022,
Af f or dabl ehousi ng- -expect edt oneed38mi llionwor kforceby2030f rom 29mi llionat
present --pr edict edt obet hekeyj obcr eat or - Bet ween2004and2005addi tionsmade
wer eabout22msqm commer cial ,and19msqm ofr esident ial bui ldi ngs. I ndi awoul d
need700- 900msqm ofbui ltspaceannual lytomeetdemandf oraddi tional const ruct ed
space - Mostnewcommer cial bui ldingsequi ppedwi thai rcondi tioni ng -Bui ldi ngs
sect or- lar gestshar eofI ndi a’sf inal ener gyusebet ween1995and2005.I n2005,
Bui ldingsect orconsumed47%wher eas Resi dent i
al bui l
di ngsaccount edf or( 93%)of
total bui ldingener gyuse( IEA, 2007) . Ai rcondi tioni ng/ li
ght ing- Twomaj orener gy
user swi thi nbui ldings Ener gyef ficientl i
ght ing, ai rcondi tioni ngandel ect ri
cal sy st ems
coul dsav eabout20%ener gyusedi nex istingbui l
di ngs St udi esi ndi cat enewbui ldings
cansav eupt o40%ofener gywi thdesi gni nter v ent ionsandECBCCode-makesbui lding
oper at ional costmuchl ower
5.5.Changi ngconst ruct ionper cept ions
6.6.BUI LDI NGSASCONSUMERSOFRESOURCESandMoney• Bui ltenv ironmenthas
signi ficanti mpactonCost , Env ironmentandConsumpt i
onofr esour ces: 16%ofwor l
d’s
freshwat erwi thdr awal .25%ofwoodhar vest ed.30%ofconsumpt ionofr awmat erial
.
50%ofgl obal ener gyconsumpt ion.35%ofwor ld'sCO2emi ssi on40%ofMuni cipal
sol idwast e.50%ofOz onedepl et i
ngCFC’ sst i
llinuse.30%r esi dent shav esi ck
bui ldingsy ndr ome•70%ofgl obal war mi ngout comeofbui ltenv ironment/
transpor tat ion• Maj orityofex ist ingbui ldingshav el owconcer nf orener gyconser v at i
on.
•Consi der ingl argequant ityofex ist i
ngbui ltspace/spacet obeadded-700-900msqm- -
Money /ener gy /env i
ronmenti mpl icat ionsofbui l
di ngswi l
lbecr itical .• Bui ldingsneedt o
bedesi gnedwi thut mostcar e/consi der ationsf orcost -effect iv eness/economy /
ener gy /sust ainabi l
ity.
7.7.Bui ldi ngEconomi cs Economi csi st hest udyofpr oduct ionandconsumpt ionof
goodsandt ransf erofweal tht opr oduceandobt aint hosegoods. Bui l
dingEconomi cs
i
sabr anchofgener al economi cs I tisbasedonappl icationofpr inci plesofeconomi cs
relat edt oconst ruct ioni ndust ry Bui l
dingEconomi csi sconcer nedwi th: - -
const ruct ioni ndust ry - -itspl acei neconomy - -r oleofconst ruct ionf irms - -r oleof
desi gner sandconst ruct ors( bui lder s),- -processesempl oy edand f i
nal bui l
ding
product Pr esentscopeofBui ldingEconomi csl ay semphasi son - -Bui ldingPr oduct
and - -howt omakei tmor eeconomi cal ,effect iveandef f
icient - -Butdoesnot
i
nv olv ingr esour cesandaccount ingpr act i
ces
8.8.I mpor tanceofBui ldingEconomi cs Needt oi ntr oducesandi nt egr at eEconomyi n
Bui ldingPr ojecti near lydesi gnst age Economyt obemadei ntegr al par tofpr oj ect
planni ng, const ruct ionandmanagement Hel psi nmanagi ngcostov er-run Hel psi n
managi ngt imeov er-runt hr ought imemanagement - Ensur ingBui ldingdesi gn
compl et edwi thinschedul et ime Pr ov idescompl et epi ctureoft ot al costofpr oj ect
Hel psdesi gneri nt egr at i
ngaest het icsandeconomy Hel psi nmeet ingcl ient sneeds
wi thingi v enr esour ces Hel psi nmeet i
ngcl ient sneedswi thi ngi venTi me Hel psi n
creat ingpr oductwi thoutsacr i
fici ngqual it
y Looksatl i
fecy clecostr at hert hani ni tial
cost Pr ov i
desmosteconomi cal sol utiont obui ldingconst ruct ion/oper at ional cost s
Reducesmai nt enancecostt omi nimum Pr ov idesv al uef ormoneyt ocl ient Hel ps
Ar chi tectt obr ingi nnov ationi ndesi gnandconst ruct ionofbui l
di ng Pr ov ideshi ghest
bui ldingef ficiencyi ndesi gn Hel psi nmaki ngpl anni ngchoi cesbr i
ngi ngmi nimum wal l
andar ear atio
9.9.Opt ionsf orBui ldingsconst ruct ed1BUI LD&SELL2BUI LD&RETAI N: –SELFUSE -
-LEASE - -RENT
10.10.Needf orCost -ef fectiveBui ldings Thebui ldingsi nwhi chwe l i
v e, work, andpl ay
protectusf rom nat ur e'sex tremes y ett heyal soaf fectourEconomy , heal t
hand
env i
ronmenti ncount lessway s. - -Allbui ldi ngact iv i
tiesi ncl udi ngdesi gni ng,
const ruct ion, use, re-f urbishment, demol i
t i
onandr e-const ruct ion- ---
--di rectly/indi rect l
y
i
mpactCost, env ironmentandener gy - Consi der abl er educt ionofCost/ ener gy/gr een
housegasemi ssi onbybui ltenv i
r onmentpossi bl e--bychangi ng- -waybui l
dingsar e
planned, desi gned, const ruct edandoper at edGr eenbui l
dingscan; - -reducecostof
const ruct ion, - -pr omot eeconomy ,- -sav er esour ces, - -sav eener gy /env ironment
and - -mor epr oduct ivef orowner sanduser s
11.11.Whati sCostEf fect iveBui ldi ng Ev er yownerwant sacost -eff ect i
v ebui lding. But
whatdoest hismean? i nt erpr et at ioni nf luencedbyi ndiv idual 'si nt erest sandobj ect ives,
-
-howt heydef ine" cost -effect ive" .I si tlowestf irst-costst ruct uret hatmeet st he
progr am? I si tdesi gnwi tht hel owestoper ati
onandmai nt enancecost s? I si tbui l
ding
wi t
ht hel ongestl ifespan? I si tf aci li
tyi nwhi chuser sar emostpr oduct i
ve? I si t
buildingt hatof fer st hegr eat estr et urnoni nv estment ?
12.12.Whati sCostEf fect iveBui ldi ng Costofconst ruct i
onwor ki si nf l
uencedbyawi de
rangeoff act or si ncl udi ng: - -ident i
tyandpr i
or it
iesofcl ient ,- -nat ur eoft hepr oject
and - -Desi gnerofpr oject --Ar chi tect ,- -choi ceofpr ocur ementopt ions - -
Pl anni ngof
Wor k - -
Execut ionofwor katsi te - --pr ev ail
ingmar ketcondi tionsand - -legi slativ e
const raint s. Cl ientex pect st hat : ef fect iv epr ojectmanagementwi llenabl epr oject
compl et i
on; - -byt imewheni tiswant ed, - -ofast andar d/qual ityt hati srequi redand
--atpr i
cet hati scompet it
iv e”
13.13.Whatconst itut esCostofBui ldi ng Costofbui ldingi ncl udes: i costofconst ruct ionii
mai ntenancecostandi iicostofoper ations Accor dingly ,thecostofBui l
dingt obe
viewedi nal lthr eeaspect s Bui ldingcostv i
ewedi nbot hl ongt erm andshor tt er m
Bui l
dingcosti sal soev aluat edi nt er msof- -Initi
al CostandLi feTi meCost Shor tTi me
costi ncl udesI ni tial Costofconst ruct ionofbui lding LongTer m costcomponent- --
whol el ifecost . Whol elifecostofbui l
di ngi ncludes: t hei nitial desi gncost
const ruct ioncost , on- goingoper at i
onsand mai ntenancecost, par tsr eplacement
cost di sposal costorsal vagev alue, and usef ul li
feoft hesy st em orbui lding To
promot eeconomy- -consi der ingbui l
dingcostov erent ir
el ifespanwi l
l becr iti
cal
14.14.Bui l
di ngs-l ifecy cl ecost sOper at i
ngCost89%Mai ntenance/Consumabl es1%I ni ti
al
Cost10%
15.15.COSTOFBUI LDI NGPROJECT- initial cost I ni ti
al Bui l
di ngPr ojectcostcompr isesof :
iCostofLand, LandRegi st ration, landsur veyi i CostofDesi gni ng, planappr oval i
iiCost
ofdev elopi ngSi t
ei vCostofConst ruct ionvCostofMoneyv iCar ryingChar gesv i
Gov ernmentf eesandTax esv i
i CostofAdv erti
sementv ii
i Legal ex pensesi xCostof
Super v i
si onxCostofManpowerandSecur it
yx i.CostofEqui pmentandFur nitur ex i
i
Transpor tationandTr avel Char gesx ii
i CostofMaki ngbui ldi ngsGr een, Ener gyef fi
cient
xivCostofTi mex vCont r
act or’ Mar ginxv i Bui l
der ’sMar ginx vii Mi scel laneousand
Unf oreseenChar ges
16.16.I NITI ALCOSTOFTHEBUI LDI NG I ni tial Costoft heBUI LDI NGmeanst het ot al cost
spenton: l and, pl anni ng, desi gni ngand const ruct ion t i
llthet imeofoccupancy .
Thecomponent sofI ni t
ial costi ncl ude: 1.LandCost : Costi ncur redi nacqui ringl andand
Regi stration.I tIncl udes(whenl anddi rect lypur chasedf rom l andowner s)--Costofl and- -
costpr iort or egi st rat ion- -CostofDocument ation- -BankChar gesf orget ti
ngdr afts
madef ormaki ngpay mentofl and- -Regi st rationChar gesofl and- -Ot herChar gesand
fees- -Mi scel laneousChar gesWhenal l
ot tedt hroughanyGov ernmentAgency- -
Allotmentcost- -Int er estCost- -Document at i
onCost- LandRegi strat ionChar ges-Fees
Char gedbyAut hor ity
17.17.I NITI ALCOSTOFTHEBUI LDI NG2.CostofDesi gni ngBui l
di ng-i ncl udes: Costof
 Sur vey ing Costoft est ingsoi l/bear ingcapaci ty/ watert abl e Feeoft heAr chitect
Bui l
di ngPl anAppr ov al fee/char ges -Scr uti
nyf ee - -Mal baFee - -LabourCess -
Super sededPl anScr utinyf ee - -Rev i
sedBui ldingPl anScr utinyFee - -CostofSt ructure
Desi gn - -Costofdesi gni ngPubl i
cHeal t
hser vices -Costofdesi gni ngEl ect ric
Ser vices - -CostofDesi gni ngHVAC - -Costofot herConsul t
ant s-Gr eenRat i
ngof
Bui l
di ng/wast emanagementet c - --CostofFeasi bil
ityAnal ysisRepor t - -Costof
Env ironmentI mpactSt udi es - -Mi scel laneous
18.18.I NI TIALCOSTOFTHEBUI LDI NG3.CostofDev elopingSi te: -
-Costofdev elopi ngt he
sitei ncludes- -- -clearingt hesi te, --pr ov idingt empor aryroads, watersuppl y(wat er
stor age)l i
ght ing, fenci ng, --get ti
ngt empor ar
ywat erconnect ion- -get tingTempor ar y
elect ricconnect i
on.- --
pr ov idingsi teut i
l
itieslike-- -siteof f
icef orpr ojectmanager /staff
and- -ot herf aci li
ties- -of fice-st ores, -CostofPr ov i
dingspacef orPar king
19.19.I NI TIALCOSTOFTHEBUI LDI NG 4.CostofConst ruct ionofBui l
di ng: i.t otalcostof
const ruct i
onoft hebui lding.- costofci vilconst ruct i
on- -costofPubl icheal t
hser v i
ces-
wat ersuppl y, sewer age, stor m wat erdr ai nage- -costofel ect ri
cal serv ices- -costof
HVACser vices- -
costofmechani cal ser vices-l i
f ts,escal ator set cii Costofmat eri
al siii
Costofl abouri vCostofTr anspor tat i
onvCostofHi ri
ngEqui pmentv i Gov er nment
l
ev ies/ fees.
20.20.I NI TIALCOSTOFTHEBUI LDI NG5.CostofMoney Amountofmoneyi nv olved
Amountofmoneygar ner edf rom ownr esour ces Amountofmoneyr aisedf rom mar ket,
fi
nanci al institut i
onset c Rat eofI nt erestofbor rowedmoney Ti medur ationof
proj ection AmountofI nt er estt obepai d Penal interestt obepai d, i
fany I nterest
char gesonconst ructionl oant il
l pr ojectcompl et i
on Cont ingencyf unds Costof
moneyi nv olved- -t obekeptl owt opr omot eeconomyi nbui lding
21.21.I NI TIALCOSTOFTHEBUI LDI NG6. Car ryi
ngChar ges: Costofowni ngofpr oject
Costofmai ntai ningsi tei nor derbef ore/dur ingconst r
uct i
onl i
ke- si t esecur ity,
fenci ng secur it
yper sonnel - -Costofser vi
cest obepai d El ectricchar ges Wat er
Char ges
22.22.I NI TIALCOSTOFTHEBUI LDI NG 7.Gov ernmentChar gesandFeesi ncl ude: Cost
ofappr ov alsofpr oject s Costofobt aininglicences I nter nal Dev elopmentChar ges
Ext ernal Dev elopmentChar ges Pl anScr ut i
nyf ee Regi strat i
onChar gesf orl andand
Bui l
di ng Pr oper tyTax es Pr of essi onal Taxes LabourCess GoodsandSer vi
ceTax
IncomeTax

23.23.INI
TIALCOSTOFTHEPROJECTv i
iCont r
actorMar ginvii
iBuil
der
’sMargini
xCostof
Advert
isementxLegalexpensesxiCostofSuper vi
sionx i
iCostofManpowerand
Securi
tyxi
ii
.CostofEquipmentandFurnit
ur exivTransportati
onandTravelChargesxv
CostofMakingbuil
dingsGreen,Ener
gyefficientxv
i Miscel
laneousandUnforeseen
ChargesXVIICostOFTimeTheSum t otalofal l
shallbecalled-I
NITI
ALCOSTOF
BUILDINg

24.24.BUI LDINGCOST-Rol eofTime Cr i

t i
calDesignTi me: t
imewher etheimpor tant
designdeci sionsaremade Det erminespr oject’
sul t
imat esuccess–ar chi t
ecturall
y,
functionall
y,economi call
y.I ncr
easeincr it
icaldesignt imemeans— - -addi t
ionalfees
ofar chit
ect/ot herconsultant
sand - -delayinpr oj
ect edstartofproj
ect.- -lossof
rentalforincreasedamountoft i
me. Howev er
,additionalinputincr
it
ical designcan
l
eadt oSav i
ngsduet o: --
Reducti
onininiti
alcostofpr oject-
-Savingsonoper ati
on,
maint enanceandener gycostsofproj
ect–t ranslati
ngt oalargeamountconsi dering
enti
rel i
fecy cleofproject. Reduct
ioninper sonnel cost s(Byempl oyi
ngl esserpeopl ein
operat i
ons)

25.25. SAVI
NGCOSTONBUI
LDI
NG
26.26.Howt osav eonCostofBui l
di ng Bui l
dingscanbemadecost -effect iveby :
Sour cingl andatmostcompet i
tiv epr ice Byadopt ingopt i
mum Desi gnsol utions-
architect urally,st r
uct urally,Ser v iceset c Byusi ngcost -
ef fectivelocal mat er i
als, pre-
cast ,pr e-f abr i
cat ed, re-cy cledmat er ial s, mat erialsr equiringmi nimum mai ntenance,
hav i
ngl ongerl i
fe Usi ngst ateofar tt echnol ogyi nconst ruct iont osav eont ime, labour ,
spacemat erialsandmoney Managi ngconst r
uct ioni nmostopt i
mum manner Usi ng
mini mum Ti mef orconst ruct i
onandcompl et i
onofbui lding/ project Desi gni ngGr een
Buildings–t or educecostofel ect ricit y/ wat erandgener atingi tsownener gy Keepi ng
costofmoneymi nimum-basedonr at esandt i
me Keepi ngBui lder s,cont ract or
mar ginsatl owestl ev el Reduci ngGov ernmentl ev iesandf ees
27.27.Reduci ngConst ruct i
onCost -Desi gn Desi gnwi t hleastamountofwast age&
negat iv espaces. St ickt or ightangl esandsi mpl er oom shapest omi ni mi zecompl ex i
ty
ofconst ruct ion. Bui ldmul ti
-st or iedconst ruct i
on-si ncef oundat i
onandr oof ingcost s
persquar ef ootar ehi gh. Usel ocal &cont empor ar ymat erials Don' tincr easesl ab
height s Pl ant ousel ightwei ghtbr i
ckst oCCbl ocks- --
reducesl oadi nst ruct ural design
Don' tdesi gnf oraddi t
ional fl
oor si fnotr equi red UseUPVCorAl umi ni um Wi ndows
i
nst eadoft eakwood, samegoesf ordoor s, usef lushdoor si nstead. Usesamef l
oor i
ng
i
nal l rooms/t oilets, thisr educeswast age. Pl anpr oper l
yEl ectri
cal /Plumbi ng--cansav e
alot. Don' tcompr omi seonqual ity--r educey ourr equi r
ement stof ity ourbudget
28.28.Reduci ngCostofBui l
di ng- Land Maki ngl andmar ketmor eef f
icientby :
streaml iningt hel andowner shi pr ecor d, r at i
onal isingst ampdut ies, mi nimi sing
benami t
r ansact ions, el i
mi nat ingspecul ationbyt axi ngv acantur banl ands,
mini mi singmonopol isat i
on, r egul at ingl anduseconv ersion, r ational isingbui ldingby e
-l
aws, z oni ngr egul ations, dev el opmentcont rol s, r ational i
singdensi t
ies, gr ound
cov erage, Fl oorar ear atio, hei ghtet c
29.29.Pr omot i
ngEconomyt hroughGoodDesi gn Pr oj ectdesi gnedt obeef fectivef or
purposesf orwhi chi ntended. Awel l desi gnedbui ldingneednotbet oahi ghl evel of
speci ficat ion. Bui ldingswhenov er-speci fiedbecomeunnecessar il
ycost ly. Awel l
deignedpr ojectwi l
l impactupon— - -sat i
sf action, - -comf ortand - -wel lbeingofi ts
occupant s, - -and, ifiti sacommer cial building, - -upont heirproduct ivityand
perfor mance.… - -Qual it
yt obeov err idingconsi der at i
on.

30.30.Pr omot i
ngEconomyt hroughGoodDesi gn Whi leconst ruct i
ngbui lding- -consi der
i
mpactofdesi gnt hroughoutl ifetimeofbui ldingson: - -placei nwhi chbui ldingi s
l
ocat edand- -onal lstakeholder s/whowi l
luset hebui lding. bui l
ding’scost s/benef its
expr essedasi mpactuponi tsoccupi ers/user s Goodbui ldingdesi gni nv olv escr eating
places/bui l
dings/spacest hat: - -wor kwel lforev eryone - -lookgood - -l astwel land
--wi lladaptt oneedsoff utur egener at i
ons Awel ldesi gnedhospi tal-
-hel pspat ients
getbet terquickly•Awel ldesi gnedschool --
-i mpr oveseducat ionalachi ev ementofi ts
pupi ls•Awel ldesigneddepar tmentst ore-
-hav edi r
ecti mpactonst ockt ur nov er•Awel l
desi gnednei ghbour hood- -benef itsfrom lowercr imeandhi gherhousev alue
31.31.Pr omot i
ngEconomyt hroughGoodDesi gnGoodbui l
dingdesi gni mpor tantbecausei t
:- -promot essust ainabledev elopment - -Impr ov esaest het i
candenv i
ronment - -
Impr ov esqual it
yofl if
eandeconomi cgr owth. - -createssuccessf ul andsust ainabl e
soci ety - -Put sland, water,dr ainage, energy ,communi ty,economi c, i
nfrast r uct
ur eand
othersuchr esour cest obestpossi bleuse–ov erlongaswel lasshor tterm Tomake
buildinghi ghlyi costef f
ect i
ve, iienergyef fi
ci entIiimor elivabl e,ivpr omot ingbui lding
efficiencyvpr omot i
ngopt imistionofl andVi minimi si
ngmai nt enanceandupkeep
Thr eekeypr incipl
esofcr eati
ngwel ldesignedbui lding:•--Gooddesi gn- --
doesnotcost
mor ewhenmeasur edacr ossl ifeti
meofbui ldingorpl ace• --Gooddesi gn---f lowsf rom
theempl oymentofski ll
edandmul ti
discipli
nar yteam •- -
St artingpoi ntofgooddesi gni s
 clientcommi tment
32.32.Pr omot ingEconomyt hroughGoodDesi gnThemai ndesi gnf act or swhi chi mpacton
costar e:
33. Pl anshape
34., Si z eofbui l
di ng,
35. Wal l tof loorr atio
36. Degr eeofci rcul at i
onspace,
37. St or eyhei ght s t ot al heightoft hebui l
ding
38. Gr oupi ngofbui ldings - -Lar gerbui l
dingswi t
h
39. - -simpl e, rect angul ar,
40. - -r egul arf loorpl ansandel ev ations
41. wi llbel essex pensi vepersq. m.off loorar ea
42. - -t hansmal l
er ,compl exshaped, cur vedorangul arbui ldi ngs.
43.
44.33.Pr omot ingEconomyt hroughGoodDesi gn GoodAr chi tect ural desi gni sbest
i
nst rumentt oachi ev emosteconomi cal buildingbasedonpr inci pl esof — Desi gna
compactbui ldingwi thmi nimum f oot prints Desi gnbui l
dingsbasedonspeci fi
ednor ms
andst andar dst oav oidt hei rov er/ under -designi ng Adoptashapewhi chl eadst o
mi ni mum l engt handar eaofwal l
s Bui ldi
ngmustachi ev ehi ghspaceef fi
ci encyi .e
car petar eax 100/ gr ossar eawi thmi nimum ar eaunderwal ls, ci rcul at ionandameni ti
es
Mi ni mi singar eaunderwal l
s- -usi ngpr e-castconcr et ebl ocks, 71/ 2“wal l
si nst eadof9”
wal ls/pr e-castconcr et ebl ocks Ev olvingdesi gnhav ingl owwal lar ea/ floorar ear atio
Ev ol vingdesi gnonopt imum st ruct ural gr i
d Desi gnl eant or educest ruct ur alloadt o
mi ni mi seuseofst eel /concr et e Usei nnov at ivetechnol ogi es- -Rat -Tr apbr i
ckwal l
st o
reducenumberofbr icksandmor tarused Usenewcost -ef f ect ivemat erial s---
aer ated
cementconcr et ebl ockst or educet hewi dthofwal l
s, number /si z eofj oint s, useof
cementet c
45.34.Si tePl anni ng- i
mpactofbui l
di ngs-mi nimi singBui ldingFoot pr ints
46.35.Economyt hroughGoodDesi gn Adoptasy stem ofbui ldi ngcommonwal lsbet ween
adj oini nghousest oeconomi seonspace, mat eri
als, time/st ruct ur e Cl ubpubl i
cheal th
ser v i
cest oget her -
-onaf loort omi nimi secost . Formul ti-st or ey edbui ldings- -
-repeat
them oneabov eot heri eKeepy ourspacest hatneedpl umbi ngcl oset oget herorabov e
eachot hert omi nimi zecost Desi gnal lpubl icheal thser vicesneart osuppl y/dr ainage
net wor kt or educel engt hofpi pesandcost Desi gnGr eenBui ldings–sav esl otofwat er
andel ect ri
cener gy -makesbui ldingcost -effect iveov erent irel ifecy cl e Pr ov ide
standar dsi z eddoor swi thlimi tedv ar i
at i
ons Al lfinishing/ fittings-f loor ,wi ndows, gl
ass,
panel inget cdesi gnedbasedonst andar dsi z epr oduct sav ailabl einmar ket-t omi nimise
wast ageet c Bui ldt omat chst andar dmat er i
al dimensi ons-f orex ampl ePl y woodi s4' x
8'.Thusi ti sbestt obui l
di n4' modul es. . Usi ngpr e-cast e/ pr e-fabr icat edpr oduct sto
theex tentpossi ble-door s/wi ndowscupboar dset c Av oi df ancy /fal se/ decor at i
ve
struct uresi nbui lding
47.36.Economyt hroughGoodDesi gn Makey ourr oomsv ersat il
et oopt imi sespace
utilisat ion— - -ex ampl e-doy our eal lyneedal ivi
ngr oom - -samespacecanser v emany
uses.Aguestr oom canbeanex pensi vel ux ur y Av oi dcor ridor st oex tentpossi ble-
Cor ri
dor scanbedeadspace- -onl yusedf ormov ingbet weenadj acentspaces Thi nk
l
ongt er m ascostofowner shi pspansmaybemanyy ear s.Someex trai nsul ationand
passi v eheat i
ng/cool ingmaybebenef icialov erthel engt hofy ourhomeowner ship..
Sel ecty ourwi ndowpl acementwel l
--t heyar ecost ly-i nfirstcostandi nener gyloss- -
-
sel ectst andar dwi ndowsi zi
ng. Keepbat hroomst oami nimum, ---mostex pensi v e
room persquar ef ooti nhome. Tr yt odesi gnmul t
i usebat hr ooms- --wi thpr ivate
encl osur esf orshower ,toiletandsi nk- -hav e3peopl eusi ngonebat hr oom atsamet i
me.
48.37.Reduci ngCostofBui lding-Tax es Reduci ng/r ational isinggov ernmentl ev ies,
char ges, feesandt ax es Gov er nmentchar ges, fees, t
axesf or m consi der abl epr opor ti
on
oft otal costofhousi ng. Tor educebui l
di ngcost- -char gesneedr at ional isat ion
Rat ional isi ngwoul di nv ol ver edef ining: - -l anduseconv ersi onchar ges, - -pl anscr ut iny
fee, - -I nt ernal Dev elopmentChar ges - -Ex ter nal dev elopmentchar ges. - -Goodsand
Ser vicesTax(GST)
49.38.Ener gyef ficiency -Embodi ed&Oper at i
ngener gy
50.39.Mat erial Ef ficiency
51.40.Costef ficiencyt hr oughBui ldingMat erialsNomodeofcr eat ioni smor edi rect/
natur al l
yar ri
v edatt hanaccumul at ionandaggl omer ationofmat er i
al sf oundcl oseat
hand.•Usi ngLocal Mat er i
al s•- -reducet ranspor tat ioncost, •- -Sav et ime, --•- -Make
product smor ecostef fect iv e- -Reduceembodi edener gyr equi rementofbui lding•Buy
l
ow- mai nt enancebui ldingmat er i
al s—- -Ev eni fmor eex pensi veati nst al l
at ion- -payi n
l
ongr unduet ol essr epai r,r epl ace, orr epai nt• .Usesal vagedmat er ialsf r om demol iti
on
sit
es.–Ol dwood, usedbr icks, di st i
nct iv ewooddoor saddi nex pensi v echar act ert o
homewi thoutex orbi tantcost –Onecanhav emat er ialsatnocost ,i
fwi l
lingt ohaul them
away .• Usel owener gymat er ial s
52.41.Bui l
di ngMat eri
al s Usi ngGr eenBui ldingmat er ials: --r api dlyr enewabl epl ant
mat erial s- -bambooandst raw, st one, recy cledst one, recy cledmet al ,---Non- tox i
c,
reusabl e, renewabl e, and/ orr ecy cl ablePr oduct si ncl ude- - -Recy cledi ndust rial goods,-
-Coal combust ionpr oduct s, foundr ysand, --Demol isheddebr isi nconst r
uct ionpr oject s.
53.42.Gr eenMat er ial-Fl yAshBr icks
54.43.Fl yAshBr icks-Adv ant ages ReducedEmbodi edEner gy :usi ngFl yash-l ime-
Gy psum br icks- -40%r educt ioni nembodi edener gyofmasonr y . Env ironmentFr iendl y :
Flyashbr ickusesunf iredFl yAsht echnol ogyhencet heCO2emi ssi onsi nmanuf act uring
processl i
mi ted. . Excel lentTher mal Insul at ion: Thebui ldingsusi ngf lyashbr icksar e
cool i
nsummer sandwar mi nwi nt ers. •Fi reResi stance: veryhi gh- -ast hesebr icks
composedoff lyashasi tsmaj orconst ituent s,whi chi sun- bur ntr esi dueoft hecoal fired
i
nat her mal powerpl ant . •NoEf fl
or escence: Flyashbr icksr esi stsal tandot her
sulphat eat tack, ensur ingnoef flor escencei nst ruct ure.
55.44.-Aut ocl av edAer at edConcr et eAut ocl av edAer at edConcr ete( sand, cal cinedgy psum,
l
ime( mi ner al), cement , wat erandAl umi num powder ,)-
-v ersat i
lel i
ght wei ghtconst ruct ion
mat erial usedasbl ockswhi char e: -Li ght wei ght-l owdensi tywi t
h- -ex cel l
enti nsul at ion
proper ties.- -goodacoust i
cpr oper ties- -dur able- --goodr esi st ancet o: -
-sul fateat tack
and- -damagebyf ireandf rost .--usedt of or mi nnerl eafofacav i
tywal l.- -al sousedi n
out erl eaf , whent heyar eusual l
yr ender edandi nf oundat ions.Aut ocl av edaer at ed
concr etei seasi lycutt oanyr equi r edshape.
56.45.Aut ocl av edAer at edConcr ete• qui ckandeasyt oi nst all•canber out ed, sanded, orcut
tosi zeonsi teusi ngst andar dcar bonst eel powert ool s•sui tedf orur banar easwi thhi gh
ri
sebui ldingswi t hhi ght emper atur ev ar iations• Duet olowerdensi ty --hi ghr isebui ldi ngs
requi rel essst eel /concr etef orst ruct ur e• requi rementofmor tarf orl ay i
ngofAACbl ocks
i
sr educedduet ol owernumber /thi cknessof1/ 8”ofj oint s• mat er i
al requi r edf or
render ing- alsol owerduet odi mensi onal accur acyofAAC• sui tabl ef orex t reme
temper at ur es, --el i
mi nat esneedf orsepar at emat er ialsf orconst ruct ionandi nsul at ion- --
fast erconst ruct ionandcostsav ings• canbecoat edwi thst ucco/ plast ercompoundt o
guar dagai nstel ement s/ cov er edwi thsi dingmat erial ssuchasbr ickorv iny l.
57.46.-Aut ocl av edAer at edConcr et e
58.47.UPVC(Unpl ast isizedPol y viny l chlor ide)door sandWi ndowsTheVi ny l wi ndows- --
excel lenti nsul at ors: -
-Reduceheat i
ngandcool i
ngl oadsby : -pr ev ent ingt her mal l
oss
throughf rame/sashmat erial .--notaf f ect edby: --weat her /ai rpol l
ut ion/- -sal t, aci d
rai
n- -i
ndust ri
al pol lution- -pest icides- smog- -discol or ationand- -st ruct ur al damage.-
userf riendl yandEco-Fr iendl y, --r eadi lyaccept edandsaf e.
59.48.Bambooi .St rengt hatparwi thhar dwood- --Bambooex tremel yst rongnat ur al fibr e,
 onparwi thhar dwoods- -whencul tiv ated, har vest ed,pr epar edandst oredpr oper ly- -
Bamboo, l
iket r uewood, isanat ur al composi temat er i
al wi thahi ghst rengt h-to- wei ght
rati
ousef ul forst ruct ures.- -Bamboohashi ghercompr essi vest rengt ht hanwood, br ick
orconcr et eandat ensi l
est rengt ht hatr i
v alsst eel i i Hi ghFl ex i
bi li
ty-Bamboohi ghl y
fl
exible- -
dur inggr owt htr ainedt ogr owi nunconv ent i
onal shapes.- -Af terhar vest ,maybe
bent/ ut i
lizedi nar chway s/cur vedar eas.i ii.Ear thquake-Resi stance-Gr eatcapaci tyf or
shockabsor pt i
on, -
-makesi tusef ul inear t
hquake-pr onear eas.i v.Li ght wei ght-Bamboo
extremel yl ight wei ght .- -Bui ldingwi thbamboocanbeaccompl i
shedf ast erwi thsi mpl e
toolst hanbui l
di ngwi thot hermat er ials.- Cranesandot herheav ymachi ner yr arel y
required. v .Cost -effect ive–Economi cal ---especi allyi nar easwher ecul tivat edand
readilyav ailabl e. - -Transpor tingcosti sal somuchl esser .- -Hel psachi ev ecost
effectiveconst ruct ion.
60.49.Bamboov i.v i.Dur abl e-Long- last ing- -asi t
swoodencor rel ates, whenpr oper ly
harvest edandmai ntained. · v i
i.FastGr owi ng- -Bamboof astgr owi ngspeci es/
renewabl er esour cewhi chcanbecul ti
vat edi nmostt y pesofsoi l.· v i
ii
.Si mpl e
designi ng-Desi gnsofBamboocomponent sbei ngsi mpl e, ther ei snoneedofhi ghl y
skill
edl abour .· ixReduci nguseofwood- -Dependencyonnat ur al forest sf orwood
reducedt huscont ributingt ot hepr ot ectionoft heenv i
ronment .· xEco-f ri
endl y--Asi t
cangr owi nmanyt ypesofsoi l, bamboocul ti
v ationi ssui tabl ef orr ehabi l
itationof
degr adedf or est sandot herwast el andst husconv ertingt hem i nt of ertil
el andst osome
extent.x i Pr omot ingEmpl oy ment –Cr eat ingempl oy mentoppor tuni t
iesespeci allyf or
ruralpeopl e- -asBamboomat smanual lywov enbef or emaki ngt hem i ntoBambooMat/
Boar ds, BambooMatVeneerComposi t
esandBambooMatCor rugat edSheet s. · xii
Promot ingWel f areofsoci ety /poor -Pr omot esov er al
l wel f areoft hesoci et y,par ticul arly
ofeconomi cal lyweakersect i
on. xi iiReduci ngGLOBALwar mi ng-Capt ur es17mt sCO2
perhect ar epery ear -mor ethananyspeci e x ivI mpr ov esi ndoorai rQual ity-Byr emov i
ng
carbonandaddi ngox ygenwhenusedasI ndoorpl ant
61.50.Pr omot ingEconomy–Gr eenBui ldingsDesi gning/const ruct ingGr eenBui ldingshel p
i
nmaki ngBui l
di ngscost -effect iveandsust ai nabl eduet o: - -consi derabl er educt ionof
oper ational ov erent irelifecy cle - -r educedener gy - -wat erconsumpt ionbesi des - -
l
owergener at i
onofwast e
62.51.Economi cAdv ant agesofGr eenBui lding
63.52.Adopt ingModul arconst ruct ion ' Modul arconst ruct ion' --ter m usedt odescr ibet he-
useoff act or y -pr oduced pr e- engi neer edbui ldinguni ts t hatar edel iveredt osi teand
assembl edasl ar gev olumet riccomponent s orassubst ant ial el ement sofabui lding
Requi ressel ect ionofmostsui tabl edi mensi onsofst ruct ural element s-sl ab, wal ls,
beam, col umnset c Pr omot essi mpl i
fi
cat i
onandspeedi erconst ruct i
onl eadi ngt o
economy . Cr eat espossi bili
tyofusi ngal ternat ivesmat er ialsi ndi f fi
cultt errai norar eas
ofnon-av ai labi lity Of ferof f-t he-shel fst andar dcomponent sf orbui ldings-Reduced
const ruct iont ime, mat er ialsandcost Adopt ingmodul arcomponent si npl anni ngand
designi nghel psi n- si mpl ifyingwor king, sav ingt ime, r educi ngwast age,
i
mpr ovingbui l
di ngper for manceand sav ingmoney
64.57.Cost–Ef fect i
v eness- --Pr ojectManagement Forpr omot ingeconomy ,cr it
ical to
adopt - -st rongpr ojectand - -cost -management
65.59.Laur iBaker f actor swhi char ei nv olvedi nAr chitect ur e. Si te, Topogr aphy
Geol ogy cl imat e v eget ation av ai l
abl el ocal mat er i
al s Rel igious&cul tur al--
patternsofl i
v i
ng
66.60.Cl ust erPl anni ng CLUSTERPLANNI NGAROUNDACOMMONOPENSPACEHel psi n
: OPTI MUM UTI LIZATI ONOFSAPCE - PROVI DINGSPACEFORCOMMUNALWORK
-PLAYAND -FORBULLOCKCARTPARKI NGETC CUTSDOWNPUKKAROAD
LENGTHS, ALLOWSFORAVARI ETYOFHOUSEDESI GNS, ANDENCOURAGES
 NEI GHBOURLI NESS. ANOPENNARROW SPACEBETWEENCLUSTERS CAN
CONTAI NFUELANDFODDERAND FRUI TTREES, SPACEFORSANI TATI ON
COMMUNALGASPLANTSETC
67.61.Cl ust erPl anni ng
68.62.COSTEFFI CIENCY Wi thmi l
lionshomel essf ami li
es- -moneyav ailabl eusedONLY
foressent ials, andnoti tforf ancyf rill
s!- Ai m-“CostEf fi
ci ency ”–Whi chcanbe
achi ev edt hr oughf ollowi ngt hi ngs; MATERI ALS–usemat erialsf orbui l
di ngLOCALLY
AVAI LABLE? MustALWAYSkeepCLI ENTi nmi nd RememberCLI ENTi sbenef i
ciary–
notaGov er nmentDepar tment - -Wi l
lhebeabl etoaccommodat ecomf or t ablyal lhis
dependant s? - -
Wi ll hebeabl et oext endhousewhen, later ,hi ssonsgr owupandear n
money ? - -Wi l
l t
hehousebeSTRONGandSECURE? - -Canshedsorv er andasbeadded
byhi mf orhomeoccupat ions, li
kecar pent ryorweav inget c? - -Doespl anal lowf orlocal
cultur al /r el i
gi ousway sofl i
ving? Whataboutwat erandsani tation? Andwhatabout
appr oachabi lity? I ft herear eanyt rees–keept hem –i ncor por at et hem i nPl an
69.68.BUI LDI NGCODE
70.69.BUI LDI NGCODE-DEFI NI TI ON Bui ldingcode- alsobui ldingcont rol orbui lding
regul ationsi sa: - -setofr uleswhi ch - -speci fyst andar dsf orconst ruct edobj ects
suchasbui ldingsandnon- bui ldingst ruct ures. Mai npur poseofbui l
di ngcodesi sto: -
-Ensur epr ov isionofbasi cameni tiesandser vices - -
Ensur esappr opr iat eai r, l
ightand
vent il
at ioni nbui ldings - -Cr eat ingDesi gnonspeci f
iedspacest andar ds Ensur es
prov isionofbasi cpubl icheal thameni ti
es- - -wat ersuppl y,- -sewer age, - -sani tation,
--stor m wat erdr ainage Pr ov isionofel ect ricity/power / - -Pr omot esaf etyofbui l
di ng-
nat ural/ manmadedi sast ers—Ear thquakeandf ir
e Speci fieswhocandesi gn/super v ise
thebui ldi ng - -Regul at euseofmat erialsi nConst ruct ion -meansofmov ement
hor izont al andVer t
ical - -Pr omot egener al/user swel far e r elat ingt ot heconst ruction
/occupancy/st ruct ur esofbui l
di ng. Bui ldingcodebecomesl awwhenf or mal ly
enact edbyt heappr opr i
ategov er nment
71.72.PURPOSEOFBUI LDI NGCODE Thepur poseofbui l
di ngcodesar et opr ovide
mi nimum st andar dsf or: saf et y, heal th, and gener al wel far ei ncl udi ng - -
st ructur al
i
nt egr ity,- -mechani cal i
nt egr i
ty( includi ngsani tation, wat ersuppl y,light , and
vent il
at ion) ,- -meansofegr ess, - -fi
repr ev ent ionand - -cont rol, and - -ener gy
conser v at i
on. Sot hepur poseofcodei st opr omot e/ensur e— qual ity, st rengt h,
compat ibi li
ty ,ef fectiv eness, f i
reandwat err esi stance, dur abi lityandsaf et y Bui lding
codehel psi nbr i
ngi nguni formi tyi nbui l
di ngoper ations-Pl anni ng, desi gni ng,
const ruct ion Pr ev ent sunder /ov erdesi gni ngi nt hebui ldings Pr ev ent ssubj ect ivi
tyof
desi gnerandbr ingsobj ectivity Pr omot eseconomyi nbui ldi ngst hr oughadopt ing
standar dsi ndesi gni ngandconst ruct i
on Pr ov i
desgui delinesf ort heAr chi tectt odesi gn
thebui ldi ngandpr ov idenecessar ysuppor tiv einf r
ast ruct ur e Ensur esbui l
di ngmeet s
theneedsoft heend-user .
72.73.BUI LDI NGCODEPr ov i
desf or Bui ldingcodesgener allyi ncl ude: Nor msf orGr ound
cov erage Bui ldingHei ght, FloorAr eaRat io, Setbacks, Hei ght ,basement St andar ds
forst ruct ur e, pl acement ,size, usage, wal lassembl ies f enest rationsi ze/ locat i
ons,
egr essr ul es si z e/locat ionofr ooms f oundat ions f loorassembl ies r oof
struct ur es/ assembl ies ener gyef fi
ciency st airsandhal l
s, mechani cal ,elect rical,
plumbi ng si tedr ainage&st or age, appl iance l ight i
ng, f
ix tur esst andar ds, occupancy
rules, and Rul esr egar dingpar kingandt r
af ficimpact
73.74.PURPOSEOFBUI LDI NGCODE Fi recodeRul es— t omi nimi z er iskofaf ireand t o
ensur esaf eev acuat ioni nt heev entofsuchanemer gency Requi rement sf or
ear thquake( seismi ccode, hur ri
cane, flood, andt sunami r
esi st ance i ndi sast erpr one
areasor f orv eryl argebui ldingswher eaf ailurewoul dbecat ast rophi c Requi rement s
forspeci ficbui ldinguses- -st orageoff lammabl esubst ances/ housi ngal ar genumberof
 people) Ener gypr ov isi
onsandconsumpt ion. Speci fi
cat i
onsofcomponent s
All
owabl ei nstall
ationmet hodol ogies Mi nimum andmax i
mum r oom andex itsizesand
l
ocat i
on Qual if
icationofi ndividualsorcor por at
ionsdoi ngt hewor k
74.75.PURPOSEOFBUI LDI NGCODE Desi gner susebui ldingcodest andar dsasr eference
booksdur i
ngdesi gn Bui ldi
ngdepar tment sr ev i
ewpl anssubmi tt
edbef oreconst ruct
ion,
i
ssueper mi t
s I nspect orsver i
fycompl iancet ot hesest andardsatt hesi teduri
ng
const r
uction. Ther ear eaddi ti
onal codes/sect i
onsoft hesamebui ldingcodet hathave
mor especi fi
cr equirement sthatappl yto - -dwel l
ingsorpl acesofbusi nessand - -
specialconst ructionobj ectssuchas: - -canopi es, si gns, pedest rianwal kway s,
parkinglots, and r adioandt elevi
sionant ennas.
75.76.BUI LDINGCODE-User s Bui l
dingcodesi nt endedt obeappl i
edby --
--- -Architects,
Engineers, BuildersandRegul ators - -
-al sousedf orv ariouspurposes– - -
-bysaf ety
i
nspect ors, - --env i
ronment al scienti
sts, - --
r eal estatedev el
opers, - --sub--
contractors, - -manuf acturersofbui ldi
ngpr oduct sandmat eri
als - --insur
ance
compani es, - -
-facil
itymanager s - -tenant s, andot her s. Codesr egul ati
ngthedesi gn
andconst ruct i
onofst ructuresar eadopt edi ntol aw.

Di
ff
erenteconomi
csy
stems
Ont hebasisoft heowner
shipanddist
ri
buti
onof
resources,t
heeconomi csyst
em canbegrouped
i
ntot hreecategori
es,whi
chareshowninFigur
e-1:

Ty
pesofEconomi
cSy
stem
Marxi
st-
Lenini
stCommunistst
ates(
red)andf
ormer
lyCommuni
st-
run
(
orange)countr
iesoft
heworld
Ty
pesofEconomi
csy
stems
Economi
cSy
stems:
Capit
alism,Communi
sm,
and
Sociali
sm

Therearesev er albasi cquest ionsthatmustbeanswer edi norderforan

economyt or unsat isfactori
ly.Thescar cit
ypr oblem, f
orex ampl e,requir
es
answerst obasi cquest ions,suchas: whatt opr oduce, howt oproducei t
,
andwhoget swhati spr oduced.Aneconomi csy stem isawayof
answeri
ngt hesebasi cquest ions,anddi ff
erenteconomi csy stemsanswer
them di
fferently.Manydi ff
erentobjectivesmaybeseenasdesi rableforan
economy ,li
keef fi
ciency ,growt h,
li
berty,andequal ity.
Economicsy st emscanbedi videdbyt hewayt heyal l
ocateeconomi c
i
nputs(themeansofpr oduct i
on)andhowt heymakedeci sionsregarding
theuseofi nput s.Acommondi sti
ncti
onofgr eatimpor tancei sthat
betweencapi talism ( amar keteconomy )andsoci ali
sm (economi c
pl
anni
ng)
.

Aneconomi csy stem consistsoftheinsti

tuti
onsandt hemet hodbywhi ch
resourcesareallocatedandpr oduct
sandser vi
cesaredistri
buted.
Economi csyst
emsdi fferpri
maril
yinwhoownst hef
actorsofpr oducti
on,
howt heall
ocati
onofr esourcesisdir
ectedandt hemet hodusedt odi r
ect
economi cacti
vi
ty .Thepr i
marydisti
ncti
onbet weenthedi f
ferentsystems
i
st hedegreetowhi chthegov er
nmentpar ti
cipat
esintheeconomy .

Capi
tal
ism

Asl
ongagoas1776,t
heScotti
shphil
osopherAdam Smithsetdown
manyoft
hemainpri
nci
plesofcapi
tal
i
sm inhisnowclassi
cbookAn
I
nqui
ryi
ntot
heNatur
eandCausesoft heWealthofNati
ons.

Undercapi tali
sm (akamar ketsy stem) ,
eachindivi
dualorbusi
nessworks
i
nitsowni nterestandmaxi mi zesitsownpr ofi
tbasedoni t
sdecisi
ons.A
mar keteconomyi sonewher et heal l
ocati
onofresourcesandthetradi
ng
ofgoodsandser vi
cesar et
hrought hedecentral
izeddeci
sionsofmany
fi
rmsandhousehol ds.Theequi li
brium bet
weensuppl yanddemand
determinespr i
ces, whichdetermi neseconomi coutput
,which,i
nturn,
determinest heallocati
onofr esour ces.

Themar ketsyst
em fosterscompet i
ti
onthatgener al
lyproducesthemost
eff
icientall
ocati
onofr esources.I
npurecapi t
alism,alsoknownasl ai
ssez
-f
airecapi t
ali
sm,thegov ernment'
sroleisrestr
ictedtoprovidi
ngand
enforcingtherul
esofl awbywhi chtheeconomyoper ates,buti
tdoesnot
i
nterferewiththemar ket Lai
.( ssez-
fair
emeans" leti
tbe.")

Theessent
ial
char
act
eri
sti
csofcapi
tal
i
sm ar
ethat
:

 thefact
orsofproductionarepr iv
atel
yowned;
 economictransact
ionst akeplaceinmar kets,
wherebuyersandsellersinteract;
 busi
nessesandempl oyeesar efreetopursue
thei
rownsel f
-i
nter
estandar emot i
vatedtodoso
bythepotenti
altoearnapr ofit;

Becauseconsumer sarefreetobuywhatt heywant

,thecompeti
ti
onfor
theirf
undswillr
equirebusinessestosat i
sfyt
hei
rneeds,orel
setheywi
l
l
ceasetoexistduetolackofsal es.Thisconsumersover
eignt
yiswhat
effect
stheeffi
cientall
ocati
onofr esources.
 Themai npurposeofthegovernmenti nregardt
ot heeconomyisto
promotefreemar ket
s,keepinf
lat
ionlowandst eady,pr
otectt
herightsof
pri
vatepropert
y,andtoguaranteecontracts,
whicharenecessar
yt o
conductbusiness.

Themai nbenefitofcapit
alism i
sthepromot i
onofcompet it
ion.Although
capit
ali
sm isusuall
ydescribedasapr i
vateownershipofr esources,it
i
scompet it
ionthatprovi
dest hemainbenefitt
osociety;thepr i
vate
ownershipofresourcesisnecessary,
butnotsuffi
cient
,forcompet it
ion.I
n
l
aissez-
fair
ecapital
ism,businessesbecomef r
eeto
form monopoli
esorol i
gopolies,
whichreducescompet i
tion,andt hereby
reducestheadvantagesofcapi t
ali
sm.Inst
ead,aplutocracyi screated,
wheretheweal t
hyruletheeconomyf orthei
rownbenef i
t.

Soci
ali
sm

Thedef i
nitonofsoci
i ali
sm v ari
eswi dely
,andmanypeopl eusei t
synony mousl yforcommuni sm, (
asy stem ofsocialorgani sat i
oninwhi ch
allpr oper t
yisownedbyt hecommuni tyandeachper soncont ri
butesand
recei vesaccor dingt otheirabi l
i
tyandneeds.Soci ali
sm i st hesoci aland
economi cdoctri
ne( t
eaching)t hatespouses( adoptorsuppor t)publi
c
overpr ivateowner shipandcont r
ol ofpropertyandnat ural resources.
Soci alistsarguet hatsinceev eryonecont ri
butestosoci etyi nthef orm of
wor k, therefor
eev eryoneshoul dbenef i
tfrom it
.Thedegr eeofowner ship
orcont roldiff
ersamongsoci alists.Somebel i
evethatthegov ernment
shoul downmostoft heproper tyandnat uralr
esources, whi leothers
believ ethatsmal lbusinessesshoul dbeownedpr ivately.St i
llothers,
mai nlyt her i
ch,bel i
evethatsi mpl ytaxingt heri
chmor ei saf orm of
soci ali
sm.

Li
kecommuni sm,soci
ali
sm seekst oredi
stri
butethewealthmor e
equit
abl
ybyt hecommunal owner shipofnatural
resourcesandmaj or
i
ndustri
es,suchasbanki ngandpubl icuti
l
iti
es.Social
ist
salsoseekt o
nati
onal
izemonopol i
es,whi
chgr eatl
yenrichthei
rowner sattheexpense
ofthepeople.Howev er,
unli
kecommuni sm, mostsmal lornonessent
ial
enter
pri
seswoul dremai
nprivatel
yowned.Al sounliketheCommuni sts,
mostsociali
st sdonotadvocatev i
olenceorforcetoachievetheir
economicsy stem.

Earl
ysoci ali
stideascent eredoncommonowner shiporcontrol,
equali
ty,
andt hesimpl elif
e.Somesoci ali
stsadv ocatedviolenceasameansof
achiev i
ngtheirends, butlatersoci
alistsdevelopedpol ici
esthat
envi
si onedanonv i
olentmeansofachi evi
ngsoci al
ism.Theywant edto
revi
seMar x'
st eachi
ngs, byadv ocatingthatsociali
stsuccessescoul dbe
achiev edthroughthebal l
otboxgr adual l
y,withoutv i
olentrev
oluti
on,and
thi
swasof t
enaccompl i
shedbyusi ngpoliti
calparties,suchastheLabor
Par
tyofGreatBr
it
ain.Thus,
var
iousf
ormsofsoci
ali
sti
deal
shav
e
dev
eloped.

Communi
sm,

alsoknownasacommandsy stem,i
saneconomi csyst
em wherethe
governmentownsmostofthefact
orsofproduct
ionanddecidesthe
al
locati
onofresour
cesandwhatproduct
sandser v
iceswil
lbeprovi
ded.

Themosti mpor t
antorigi
natorsofcommuni stdoctr
inewereKar l
Mar xandFrederickEngels.Likethesociali
stsbefor
et hem,theywanted
toendt heexpl
oitati
onofthemassesbyt hefew.Thecapital
istsyst
em at
thatti
mer equi
redwor ker
st owor kunderharshanddanger ousconditi
ons
forli
tt
lepay.Theendgoal ofcommuni sm wast oeli
mi nat
eclass
dist
incti
onsamongpeopl e, whereeveryonesharedequal l
yinthe
proceedsofsociety,whengov ernmentwoul dnolongerbeneeded.

KarlMarxagr
eedwi thLoui
sBlancinhowlaborandi ncomeshouldbe
managed:"Fr
om eachaccordingtohisabil
i
ties,toeachaccordi
ngtohis
needs.
"Howev er
,itseemsclearf
rom hi
stor
yt hatAdam Smithhadthe
corr
ectpri
nci
ple,
whi chi
sthatpeopleworki
nt heirownsel
f-i
nter
est
.

Mar xandEngelsbel i
evedther ewasacl assstrugglebetweent hemasses,
whichMar xcall
edt heprol
et ariat,whocoul donlyoffertheirl
abor ,andt he
ownersoft hemeansofpr oduct ion,whichi ncludedland,rawmat erial
s,
toolsandmachi nes,andespeci all
ymoney .Kar l
Marxcal l
edt her ul
ing
classthebourgeoisie.Hebel i
ev edt hatapol it
icalr
evoluti
onwasessent ial
becausethestatewasacent ral i
nstrumentofcapi tali
stsociety ,
andsi nce
thebourgeoisi
ehadast r
angl ehol dont hegov ernment ,
itwoul dbe
necessarytousef orceandv iolencet oov erthrowthecapi tal
i
sts.

AlthoughMar xandEngel
sbelievedthatpropert
yshouldbelongt osociet
y,
theydidnotreall
ygi
vemucht houghttohoweconomi cdecisionswould
bemade.Communi stcount
ri
es, par
ti
cularl
yRussiaandChi na,deci
dedon
acent r
all
yplannedeconomy( akacommandeconomy ).Thecent r
all
y
plannedeconomyhadt hefol
lowingmaj oratt
ri
butes:

 Thegov ernmentownsal lmeansofpr oduction,

whichismanagedbyempl oyeesoft hestate.
 Theseempl oyeesoperateunderpar t
y-appoint
ed
economi cplanner s,
whosetout puttargetsand
pri
cesandf requentl
yinter
feredwi ththe
operati
onst osat i
sfypersonalorpar tydesir
es.
 Andbecausecommuni steconomi esar enot
eff
ici
entandbecauseoft heCommuni stParty
's
desir
etor etainpower ,mosteconomi cresources
weredev otedt oindustr
ial
izati
onandt othe
 mili
tary
,deprivi
ngconsumer soffoodandother
necessaryproducts,causingintensecompet
iti
on
fort
hesel i
mitednecessities,wheremanypeople
hadt owaiti
nl ongli
nesf orcommonconsumer
goods,suchast oil
etpaper .

Anothermaj
orfeatur
eofcommuni steconomieswastheiremphasi
son
thecount
ry'
sself
-r
eli
ance,
discour
agingint
ernat
ional
tradeand
i
nvestment.

Majordecisionswer emadebyt hehighest-r

ankingmember softhe
Communi stPar t
y,which,
intheSov i
etUnion, wasthePol i
tbur
o.The
Poli
tbur
of requentl
ymetwi ththeCentralCommi tteethatconsi
stedofthe
headsofthel ocalCommuni stPart
yfactionsandgov ernmentmi ni
str
ies,
themili
tar
y ,pol
ice,andothermajorparti
cipantsintheeconomy .

Althoughthepurposeofcommunism wastoservetheneedsofthe
prolet
ari
at,communistgover
nmentssimplybecamerepr
essiveregimes
thatexpl
oitedthei
rpeopl
etoaggrandi
zethei
rownpower ,expl
oit
ingthe
massesev enmor esothanthecapi
tal
ist
s.

Acapi t
alisteconomyal sor equi r
esagov ernmentt oenactand
enforcelaws, t
opr omot eeconomi cstabil
it
ythroughmonet arypol
i
cy,
toprovideser vi
cesthatcannotbepr ovi
dedbyamar ketsystem,
suchasami l
it
arytopr otectsoci et
yagainstforei
gni nvaders,andt
o
redi
stri
but esomeoft heweal tht opoorerpeople,especiall
yby
provi
dingsoci alsecurit
ypr ograms, suchasheal t
hcar e,whichis
unaffordableformanypeopl e.Becauset hegov ernmentpl aysa
prominentr ol
einal l
economi es, al
lcapit
ali
sti
ceconomi esare
consideredmi xedeconomi es, combiningsomef eaturesofa
commandeconomywi thamar keteconomy .

Ther edistr
ibutionofsomeweal thisnecessar y
,becauseev eni na
capit
al i
steconomy ,somepeopl egai ntremendousweal th, thenuse
i
ttoinf l
uencegov ernment st omaket hem evenweal thi
er ,usuallyat
theex penseofpoorpeopl e.Fori nstance, i
nt heUni t
edSt ates,
workingi ncomei stax edatahi gherr atethanei therinvest ment
i
ncomeori nherit
edi ncome, i
ncomet hataccr uesmost l
yt ot he
wealthy.Althought her eisapr ogr essive,mar gi
nal i
ncomet axr atei
n
theUni t
edSt ates,thet axisal mostaf lattaxwhenpay r
ol ltaxesar e
added, andsi ncepay rollt
ax esdonotappl ytoeitherinv estment
i
ncomeori nherit
edi ncome, mostweal thypeoplepayal ower
percentageoft hei
rincomei nt axest hanei t
herthemi ddlecl ass,or
evenmanyoft hepoor ,whichisoner easonwhyt hetop1%ar e
accumul atinganev ergr eaterpor tionoft hewor ld'
sweal th.
I
ndi
anEconomy

TheyarethreesectorsintheIndianeconomy ,theyare;primar
yeconomy,
secondar
yeconomy ,andterti
aryeconomy .I
nt ermsofoper at
ions,t
he
Indi
aneconomyi sdividedintoorganiz
edandunor gani
zed.Whi l
efor
ownershi
p,itisdi
videdintothepublicsectorandt hepri
v at
esector
.But
today,
wear eonlygoingtot al
kaboutt hesectorsofIndianeconomyand
whatconsistsofthesesectors.

Humanact i
vit
ieswhichgeneratei
ncomear eknownas
economicacti
v i
ti
es.Economicacti
vi
ti
esar ebroadl
ygrouped
i
ntoprimary,
secondar y
,ter
ti
aryact
ivi
ti
es.Higherser
vices
underter
ti
aryactiv
iti
esareagaincl
assif
iedint
oquaternar
yand
quinar
yacti
vit
ies.

Letusf i
rstunder
standt hediffer
encesbetweent hedif
fer
ent
sectorsoftheeconomy , sothatitwi
llbeeasierforusto
understandthefactorsresponsiblef
orthelocati
onofpr i
mary,
secondar y
,andterti
arysectorindust
ri
esinv ari
ouspartsoft
he
world(incl
udingIndi
a)

Pr
imar
ySect
or

Theprimarysect
orinIndi
aisthesectorwhi
chisl
argelydependantonthe
avai
labil
i
tyofnat
uralr
esourcesinordert
omanufactur
ethegoodsand
al
sot oexecut
evari
ousprocesses.Theserv
icesi
nthissectorar
eentir
ely
dependantontheavai
labi
li
tyofthenatur
alr
esour
cesinor dert
okeepthe
day-
to-dayoper
ati
onsrunning.

Aswehav ethecl
earideaofthi
ssectoris,t
hebestexampl
etodiscussin
thi
ssectori
stheagr
icult
uresector
.Theotherexamplesi
nthi
ssector
i
ncludefi
shi
ngandforestr
y,butagri
cul
tureaccount
sfort
helar
gestinthi
s
sector
.

Oneofthemaj
orpr
obl
em t
hatthi
ssect
orfacesist
heunder
empl
oymentandthe
di
sgui
sedempl
oyment
.Under
employmentaccount
sfort
hework
ersnotwor
kingtot
he
bestoft
hei
rcapabi
l
iti
eswhi
l
ethel
att
eraccount
sfort
hewor
ker
snotwor
kingt
othei
r
tr
uepotent
ial
.

Asasoluti
ontotheprobl
ems,thest
ate,aswell
asthenat
ional
government
,can
i
ncreaset
hefundsforthei
rr
igati
onfaci
l
iti
esandpr
ovidel
oansforbuyi
nghi
gh-qual
i
ty
seedsandfer
ti
li
z s.Pr
er i
mar yact i
viti
es

Primar yacti
vit
iesaredirectl
ydependentont heenvi
ronmentas
theser efert
out i
li
sationofear t
h’sresourcessuchasl and,
wat er,veget
ation,buil
dingmat eri
alsandmi neral
s.I
t,thus
i
ncl udeshunt i
ngandgat her
ing,pastoral
activi
ti
es,f
ishing,
forestry,agr
icult
ure,andmi ningandquar ryi
ng.

Peopleengagedi
npri
maryacti
vi
ti
esarecal
l
edr ed-
col
larworker
sduetotheout
doornat
ureofthei
rwork.

Secondar
ySect
or

Theeconomyi nthesectorisdependentonthenaturali
ngredi
entswhichareusedto
creat
etheservi
cesandpr oductsoffer
edandwhi chattheendareusedf or
consumpti
on.Intermsofv alueaddedtotheproductsandservi
ces,thi
ssectori
sthe
bestsect
or.Themaj orexamplesthatfal
lundert
hiscategoryar
et r
ansport
ati
onand
manufact
uri
ng.

Boththesesect
orsendproducti
stheconsumpt
ionbythepeopl
e.Thi
ssectori
s
responsi
blef
ortheemploymentofal
most14percentoft
heenti
reworkf
orce
current
lywor
kingi
nIndi
a.Thesecondarysect
oralsocontr
ibut
estoalmost28
percentoft
heshareofGDP.Thi
ssectoristhebackboneofIndi
aneconomyand
therearemoredev
elopmentandgrowthinthenearfut
ure.
Secondar
yact
ivi
ti
es

Secondar yact
ivi
ti
esaddv al
uet onat
ural r
esour cesby
tr
ansformi ngrawmateri
alsint
ov al
uablepr oducts.Secondar
y
acti
vit
ies,ther
efor
e,ar
econcer nedwithmanuf actur
ing,
processingandconstr
uction(i
nfrast
ructure)industri
es.

Peopleengagedi
nsecondar
yact
ivi
ti
esar
ecal
l
edbl
ue-
col
l
ar
workers.

Ter
ti
arySect
or

Thissectorcont
ri
butesthelargestintermsofshar einGDPinIndia.Thesect
orisalso
theservi
cesectorandisimpor t
antwheny ouconsidert
hedevelopmentoftheother
twosectors.Li
ketheprevi
oussect or,thissect
oralsoaddsthevaluetotheproduct
s.
Thissectorisr
esponsi
bleforempl oying23per cent
ageofthewor kf
orceoutofthe
tot
alwork f
orcecur
rentl
ywor k
inginI ndia.

Theex ampleoft hi
ssectorisal
lservicesectorswhichITserv
ices,
consult
ing,
etc. Thi
s
sectorcont r
ibutestoalmost59per centofthet ot
alshar
eofGDP.Themai npr oblem
thatthissectoristhatthejobswhichi nv
olvelowersalar
iesdonotatt
ractmuch
empl oy ment.Andthisremainsthefuturedil
emmaasI ndiai
slooki
ngfordouble-digi
t
growt hinthenearf ut
ure.
Ter
ti
aryact
ivi
ti
es

Terti
aryacti
vi
ti
esincl
udebot hproductionandex change.The
producti
oninvol
vesthe‘provisi
on’ofservi
cesthatare
‘
consumed.Ex changeinvolvestrade,
transpor
tand
communi cati
onfaci
li
ti
est hatareusedt oover
comedi stance.

Ter
ti
aryj
obs=Whi
te-
col
larj
obs.

Quat
ernar
yact
ivi
ti
es

Quaternaryacti
viti
esar especi al
i
zedterti
ar yact i
vit
iesint he
‘
KnowledgeSect or’ whichdemandsasepar ateclassifi
cation.
Therehasbeenav eryhighgr owthindemandf orand
consumpt ionofinformat i
on-basedservicesf rom mut ual fund
manager st ot
axconsul tants,softwar
edev elopersand
stat
ist
icians.Per
sonnel workinginoffi
cebui l
dings,element ar
y
school
sanduni v
er sit
yclassrooms, hospitalsanddoct ors’
off
ices,theatr
es,accounti
ngandbr okeragef i
rmsallbelongto
thi
scat egoryofservi
ces.Likesomeoft het er
ti
aryfuncti
ons,
quaternaryacti
vi
tiescanalsobeout sourced.Theyarenott i
ed
toresources,aff
ectedbytheenv i
ronment ,ornecessari
l
y
l
ocalisedbymar ket.

Qui
nar
yact
ivi
ti
es

Quinaryact i
vit
iesar eser vi
cest hatf ocusont hecr eat i
on, r
e-
arr
angementandi nterpret
at ionofnewandex i
st i
ngi deas; data
i
nterpretati
onandt heuseandev aluationofnewt echnol ogies.
Oftenreferredt oas‘ goldcol lar’prof essions,theyr epresent
anothersubdi visionoft het ert i
arysect orrepresent ingspeci al
andhighl ypaidski ll
sofseni orbusi nessex ecutives,
governmentof fici
als,resear chsci ent i
sts,fi
nanci alandl egal
consultants,etc.Thei rimpor tancei nthest ructureofadv anced
economi esf arout weighst hei rnumber s.Thehi ghestlevel of
decisi
on-maker sorpol icymaker sper f
ormsqui naryact i
viti
es.

Qui
nar
y=Gol
dcol
l
arpr
ofessi
ons.

Economi st
st r
adit
ionall
ydivi
dethefact
or sofproducti
onintof
our
categori
es:land,l
abor,capit
al,
andentrepreneurshi
p.Landref
ersto
natural
resources,laborref
erstoworkef f
ort
,andcapitali
sanyt
hing
madet hatisusedt omakesomet hi
ngel se.
Someoft heimpor tantfact or
sofpr oducti
onare:(i
)Land
(i
i)Labour( i
ii
)Capi t
al(iv)Ent r
epreneur.
What ev
eri susedinpr oduci ngacommodi t
yiscall
edit
s
i
nputs.Forex ampl e,forproducingwheat ,afar
meruses
i
nputslikesoi l
,tr
actor,tools,seeds,manure,waterand
hi
sownser v
ices.
All
theinputsar
eclassif
iedintotwogroups—pri
mary
i
nputsandsecondaryinputs.Pri
mar yi
nputsr
ender
serv
icesonlywher
eassecondar yinput
sgetmergedint
he
commodi t
yforwhi
cht heyareused.
Intheaboveexampl e,soi
l,t
ractor,
toolsandf armer ’
s
servi
cesarepr i
maryinputsbecauset heyrenderser vi
ces
onlywhereasseeds, manure,waterandi nsecti
cidesare
secondaryinputsbecausetheygetmer gedinthe
commodi tyforwhichtheyareused.Itispr i
maryi nputs
whicharecalledfact
orsofpr oducti
on.
Primaryinputsarealsocall
edf actorinputsandsecondar
y
i
nputsar eknownasnon- factorinputs.Alter
nati
vel
y,
productionisundert
akenwi t
ht hehelpofr esour
ceswhich
canbecat egori
sedintonatural r
esour ces(l
and)
,human
resources(l
abourandent r
epr eneur)andmanuf act
ured
resources(capi
tal)
.
All
f act
orsofproducti
onar
etr
adi
ti
onal
lycl
assi
fi
edi
nthe
fol
lowingfourgroups:
(i)Land:
Itref erstoal lnat
ur alresourceswhi charefr
eegift
sof
nat ure.Land, therefore,includesal lgi
ftsofnat
ure
av ailabletomanki nd—bot hont hesur f
aceandunderthe
sur face, e.g.
,soil
,rivers,wat ers,for
ests,mount
ains,mines,
deser t
s, seas,cli
mat e, r
ains, ai
r,sun,etc.
(i
i)Labour :
Humanef fort
sdonement al
lyorphy si
call
ywi t
htheaim of
earningincomeisknownasl abour.Thus,l
abourisa
physicalormental ef
fortofhumanbei ngintheprocessof
production.Thecompensat iongiventolabourersinret
urn
fortheirproduct
ivewor kiscall
edwages( or
compensat i
onofempl oyees).
Landi sapassi
vefactorwher easl
abourisanact ivefact
or
ofproducti
on.Act
ually,
itislabourwhichi ncooperat
ion
wit
hl andmakesproduct i
onpossible.Landandl abourare
al
soknownaspr i
mar yfactorsofproductionastheir
suppliesar
edeter
mi nedmor eorlessout sidet
he
economi csyst
em i
tself
.
(ii
i)Capit
al:
Allman-madegoodswhi chareusedforfurther
product
ionofweal t
har eincl
udedincapit
al.Thus,
itis
man-mademat er
ialsourceofproducti
on.Alter
nat
ivel
y,al
l
man-madeai dstopr oducti
on,whi
charenotconsumed/ or
thei
rownsake, aretermedascapi t
al.
Iti
sthepr oducedmeansofpr oduct i
on.Examples
are—machi nes,t
ools,buil
dings,roads,bri
dges,raw
material,
trucks,
factori
es,etc.Ani ncr
easeinthecapital
ofaneconomymeansani ncreasei ntheproducti
ve
capacityoftheeconomy .Logicallyandchronological
l
y,
capit
al i
sder i
vedfr
om landandl abourandhast heref
ore,
beennamedasSt
ored-
Upl
abour
.
(i
v)Ent repreneur:
Anent r
epreneurisaper sonwhoor gani
sest heother
factorsandunder takesther i
sksanduncer tainti
es
i
nv olvedint heproduction.Hehi r
est heothert hr
eef actor
s,
bri
ngst hem t ogether,organisesandcoor di
nat esthem so
ast oear nmax imum pr ofit
.Forex ample,Mr.Xwhot akes
theriskofmanuf acturingtelevi
sionsetswillbecal l
edan
entrepreneur .
Anent repr
eneuract sasabossanddeci deshowt he
busi
nessshal lrun.Hedeci desinwhatpr oportionfact
ors
shouldbecombi ned.Whatandwher ehewi llproduceand
bywhatmet hod.Hei slooselyident
if
iedwi t
ht heowner,
speculator
, i
nnovatororinventorandorganiseroft he
business.Thus,entrepreneurshipisatraitorqualit
y
ownedbyt heentrepreneur.
Someeconomi stsareoftheopini
onthatbasicall
ythere
areonlytwof actor
sofproducti
on—landandl abour.Land
theysayisappr opr
iatedfr
om gif
tsofnaturebyhuman
l
abourandent r
epreneuri
sonlyaspecialvari
etyoflabour.
Landandl abourare,ther
efor
e,pri
maryfactorswher eas
capit
alandent repr
eneuraresecondar
yfactors.

Thef i
rstfactorofproducti
onisl and, butthisi ncl
udesanynat ural
resourceusedt oproducegoodsandser vices.Thisincludesnotjust
l
and, butany t
hingthatcomesf rom t heland.Somecommonl andor
naturalresourcesarewater,oi
l
, copper ,nat uralgas,coal,andforests.
Landr esourcesaretherawmat erial
si nthepr oducti
onpr ocess.These
resourcescanber enewable,suchasf orests,ornonr enewablesuchas
oilornaturalgas.Theincomet hatr esour ceowner searninreturnfor
l
andr
esour
cesi
scal
l
edr
ent
.

Thesecondf actorofpr oductionislabor.Labori stheef fortthatpeople

contr
ibutetothepr oductionofgoodsandser vices.Laborr esour ces
i
ncludethewor kdonebyt hewai t
erwhobr ingsy ourfoodatal ocal
rest
aurantaswel last heengineerwhodesi gnedt hebust hattransports
youtoschool.Itincludesanar t
ist
'screati
onofapai ntingaswel l ast
he
workofthepilotflyi
ngt heai r
planeov er
head.I fyouhav eev erbeenpaid
forajob,youhav econt r
ibutedlaborresour cest othepr oductionof
goodsorser vi
ces.Thei ncomeear nedbyl aborr esourcesi scalled
wagesandi sthel argestsourceofi ncomef ormostpeopl e.

Thet hirdfactorofproductioniscapi tal

.Thinkofcapitalasthe
machi nery,tool
sandbui ldingshumansuset oproducegoodsand
serv
ices.Somecommonexampl esofcapi tali
ncl
udehammer s,for
kli
ft
s,
convey erbelts,computers, anddeliveryvans.Capi
tal di
ff
ersbasedon
thewor kerandt het
ypeofwor kbeingdone.Forexampl e,adoct ormay
useast et
hoscopeandanexami nationroom toprovidemedi calservi
ces.
Yourt eachermayuset extbooks, desks,andawhi teboardtopr oduce
educat i
onser vi
ces.Thei ncomeear nedbyowner sofcapi t
alresourcesis
i
nterest.

Thef ourthfactorofproductionisent r
epr eneur shi
p.Anent repreneurisa
personwhocombi nestheot herfactorsofpr oduct ion-land, l
abor ,
and
capital-toearnapr ofit
.Themostsuccessf ul entrepreneur sar e
i
nnov atorswhof i
ndnewway spr oducegoodsandser v
icesorwho
developnewgoodsandser vi
cest obringt omar ket.Withoutt he
entrepreneurcombi ni
ngl and,l
abor ,
andcapi tal i
nnewway s,manyoft he
i
nnov ationsweseear ounduswoul dnotexi st.Thi nkoft he
entrepreneurshipofHenr yFordorBi ll
Gat es.Ent repreneur sar eav ital
engineofeconomi cgrowt hhelpingtobui ldsomeoft hel argestf i
rmsi n
thewor ldaswel lassomeoft hesmal l businessesi ny ournei ghborhood.
Entrepreneursthrivei
neconomi eswher etheyhav ethef reedom t ost art
businessesandbuyr esourcesf reel
y.Thepay mentt oent repreneurshi p
i
spr ofi
t.

Suppl
ycomponentofconst
ruct
ion

3.Intheconstructi
onindustrythemai nfactorsofproduct i
onare:
(a)
buil
dingmaterial
s;(b)labour;(
c)equipment ;and(d)finance.Ener
gyisal
so
acrucialf
actorofproduct i
onbutisnor mallyaccountedf ori
nthe
producti
onanddi str
ibuti
onofbui l
dingmat eri
als.
4.Thesi ngl
elargestinputinconstructionisbuildingmat eri
als,
whichcan
ty
picall
yaccountf orover50percentoft hetotalvalueofconstructi
on
output.Thereisav astrangeofbui l
dingmat eri
alsusedi ntheconstr
ucti
on
i
ndustry,notabl
ybasi cit
emsandanci llar
ypr oducts.Howev er,f
orthe
deli
veryofanyconst ructi
onout put,
ev eryspecifi
edbui ldi
ngmat er
iali
sof
vi
talimpor t
anceandnonav ai
labil
it
yofasi ngleseemi nglyuni
mpor t
antit
em
maybet hecauseofanabandonedconst ructi
onpr oject.

5.Labourconst i
tut
est hesecondl argestsinglecomponentofr esour ces
requir
edbyt heconst r
uctionindust r
y .Inconstruct i
on,labouriscl assified
i
ntof ourbasi cgroups:(a)unski ll
ed;(b)skill
ed, e.g.,masons, plumber sand
carpenters;(c)professionals,e.g.,
archi t
ects,civilengineersandquant i
t y
surveyors;and( d)manager s,notablycont r
actor s.Thebasi cpr acti
cei n
constructi
onr equiresami xofal lt
hel abourgr oupsi nani nterdepedent
manner .Wi t
hinsomel i
mi ts,l
abourcanber eplacedbymachi nery.Howev er
,
certai
noper ationsinconst ructi
onar eski l
l-
int
ensi vewi thnooppor tunities
forsubstitut
ionofl abourwi thcapital.Evenwher emachi nerycansubst i
tute
l
abour ,t
hecapi t
alscarcit
yi ndev el
opi ngcount ri
esi mpl i
esthatt heabsence
ofrequisit
eski ll
scanl i
mi tthecapaci tyoftheconst ructi
oni ndustry.

6.Asr esourcei nputs, pl

ant ,equi
pmentandt oolsconst itutesmal ler
proporti
onsoft otalcostt hanbui l
dingmat erial
sorlabour .Despi t
et hatfact
,
thenatureofcer t
ainconst ructi
onact i
vit
ies,suchastheconst ructionof
dams, airportsandi rr
igat i
onschemes, tendst omaket hecont r
ibutionsof
plantandmachi ner yindispensablet othesuppl yofconst ruct
ion.If
appropriatel
yut il
i
z ed,machi ner
yandt oolsar ecapableofi ncreasing
productivit
yinconst r
uctionact iv
iti
es,therebyleadi
ngt or eductionsi nthe
costofconst r
uctionandi mpr ovedperformance.Pr efer encef ormachi nery
overlabouri snor mallyinfluencedbyt hehi ghcostofl abourandi tsl ow
productivit
y.

7.Thecostofconst ruct i
onisusual l
yhi ghbecauseoft hehighcostof
buildingmat eri
al s,l
abourandequi pment .Theconst r
uctionindust ryis
dependentonf inancingr equired, amongot herthi ngs,topur chasepl ant,
equi pment ,machi nery, buil
dingmat eri
al sandot heri nputs.Apar tfrom
i
nv est mentsincapi tal stockandf ixedasset s,demandsf oroper ational or
wor kingcapi t
al arehigh.Somet i
mes, thepr ecar i
ousnat ureofbui lding
mat er i
alssupplymeanst hatlargesumsofmoneyar erequiredt opur chase
buildingmat eri
al sandkeept hem i nstocki nant icipati
onofanev ent ual
shor tage.Similarly,
cont r
actorsr equiref undst or et ai
normai ntainatl east
thecor eofthel abourf orcedur ingseasonsofl owornoconst ruction
demand.Becauseoft hel ongper iodf orwhi chi nv estment sinconst ructi
on
mat ur e,f
inanci
ngofconst r
uct i
oni snotat tr
activ eont hemar ket.In
addi ti
on, t
herear erisksi nconst ruction, suchasacci dentaldamaget o
heav yequi pmenti nci vilengineeringwor ks, sot hatav i
ableinsur ance
schemeisdesir
abl
easani
ncent
ivet
oat
tractaf
lowoff
undsf
orf
inanci
ng
ofconst
ruct
ion.

8.Byi tsv erynat ure, thesuppl ycomponentofconst r

uct ionhasf arreachi ng
i
mpl i
cat ionsf orplanni ngoft heconst ructioni ndustry.Thi si slar gelyduet o
thef actt hat,whileeachf actorofpr oduct ioni sessent ial,suppl yof
const ruct ionisonl ypossi bl
ewhenal lt
hef actorshav ebeenbr ought
toget heri nadesi redmi x .Tot heex tentthatasi nglefact orofpr oduct ion
cancr ippl etheent ireconst r
uct i
oni ndust ry,planningisessent ial t
oensur e
theav ailabili
tyofal lf actorinput sinabal ancedmanner .Howev er,the
factor sofpr oduct i
on, oftenhav enor elati
onshi pt oeachot her ,belongi ngt o
separ at esect orsoft heeconomyandr espondi ngt osepar atei nstitut i
onsin
ani solat edmanner ,sot hatther eareser iousi mpl i
cationsf orpl anni ngi f
thef act or shav etoi nt er
actf orasi nglepur pose.Eachoft hef ourmai n
factor sofpr oduct i
oni nconst r
uct i
on,isini tself,t
heout comeofacompl ex
i
nt eract ionofact i
vities.Fori nstance, thebui ldingmat erial
si ndust ry
i
nv olvesani nteractionofsev eralsector ssuchast hechemi cal indust ries,
agr i
cul ture,ener gyandot hermanuf actur i
ngact iv
iti
es.Fort hisr eason,
suppl yofasi nglef act orofpr oduct i
oni nconst ructi
on, requi resal ev elof
planni ngt oensur et hatf ragment edact ivi
ti
esar ebroughtt oget herf ort he
desi r
edout put.

9.Inmostdev elopingcount r i
es, t
hesuppl ycapaci tyoftheconst r
uction
i
ndust r
yi sdependentoni mpor ts.Ty pi
call
y ,bui
ldingmat erial
s, l
abourand
equipmentar ei mpor t
edi nr el
ativelylargequant iti
es.Becauseoft he
scarcit
yoff or eignexchange, therei sal i
mi ttotheav ail
abi l
ityofi mpor ted
factorinputs,t huslimiti
ngt hesuppl ycapaci tyoft heindust ry.Insome
i
nstances, ther eisani ndigenouscapaci t
yf orsuppl yofconst ruction
mat eri
alswi thl i
tt
ledependenceoni mpor ts.Howev er,t
her ear ecer tain
constraintswhi chstil
lli
mi ttheindi genoussuppl ycapaci tyoft hei ndustry.
Forinstance, anex pansioni nthesuppl yofbui l
dingmat erialsfrom
i
ndigenousi ndust ri
escanonl ybeachi evedwi thincer t
ainr esour ce
capabiliti
esandwi t
hinast ipulatedt imeper iod,becauseoft hei ntri
cate
processesi nvol vedinbui l
dingmat er i
alsproduct i
on.Si mi l
ar l
y,the
expansi onofmanpowerr esour cesi nconst ructi
oncanonl ybeachi eved
overaspeci f i
edper i
odoft ime, ar elati
velylongper i
odoft ime.Al lthese
i
ssuesar emat tersofconcer ntopl anning.

const r
ucti
onisr ef
err
edtoasaneconomi cacti
vi
tyt
hati nvol
vest he
enti
reconstructi
onprocessfr
om produci
ngrawandmanuf actured
buil
dingmat er
ial
sandcomponent s,andpr
ovidi
ngprofessionalservi
ces
suchasdesi gnandpr oj
ectmanagement,t
oexecuti
ngt hephy si
calwork
onsite.Int
hisv i
ew,constr
uct
ionisaneconomicacti
vi
tyt hatcrosses
overallthreeeconomi csectors: pri
mar ysectort hati nvolvest he
extr
actionofnat uralresources; secondar ysect ort hatinvolvest he
manuf actureofbui l
dingmat erialsandcomponent s, andt he
tr
ansformat i
onoft hesemat eri
al sintofini
shedbui ldings;andt ert
iary
sectorthatinvol
v esthepr ovisi
onofconsul t
ancyser v i
cessuchas
proj
ectmanagement ,designandst ructuralengi neering( Gruneber g,
1997).From thisangl eofappr oach, theconst ructionpr ocessact uall
y
star
tslongbef oret hephysical wor konsi tethatt ransformsmat erial
s
anddesi gnintothecompl etebui ldi
ngs,structuresandf acil
it
ies.
Att heot herext reme, const ruct ioni sconcei vedasaneconomi cact iv
ity
thatf ocusesonl yont hel astst ageoft heconst ructionpr ocesswhi chi s
thephy sicalwor kcar riedoutont heproduct i
onsi te.Fr om this
perspect iv e,al
l ser vi
cessuchaspr ojectmanagement ,planningand
desi gnaswel last heof fsi temanuf actur eandsuppl yofbui lding
mat erialsar eexcl uded.Onet y pical exampl eoft hiskindofdef i
nit
ioni s
theonepr ovidedi nt heI nt ernat ional Standar dI ndust r
ialClassi f
icationof
allEconomi cAct i
viti
es( Uni tedNat i
ons, 1990).Accor dingt othis
classification,pr ojectmanagementf orconst ruct i
on, architecturaland
engi neeringact i
v i
ties, andt hemanuf act ureofbui ldingmat erial
sar e
l
istedunderdi fferentcat egor iesot hert hanconst ruction.Thi smannerof
classificationisconsi der edconv enientf orstat i
sticalpur poses( Of ori
,
1990) .Fol lowingt hiscl assi ficat ion,const ructioni sper ceivedasan
economi cact i
vitydi rect edt ot henewwor k, r
enov ation, r
epai ror
ex t
ensi onofbui ldings, struct ur esandot herheav yconst ructionssuchas
roads, bridges, damsandsof or th(UnitedNat ions, 1990) .Accor dingly,
onlyt hewor kfor cewor kingont heconst r
uctionsi teisdef inedast he
l
abourf or ceoft heconst ruct i
oni ndust ry(Ive&Gr uneber g, 2000) .
Therei sonemor ewayofdef iningt heconst ruct
ioni ndustry ,whichi s
somewhati nbetweent het woabov ement ionedext r
emes.I nthis
contex t
,const ructi
oni sr eferr edt oast hepr oductionpr ocessoft hebui l
t
environmenti ncl
udingv ar i
ousact i
vit
iesf rom concept i
ont hroughdesi gn
toex ecution.Theobj ect soft hebui l
tenv ironmenti ncl udebui ldi
ngsand
otherf i
xedst ructures(Ive&Gr uneber g, 2000) .I
not herwor ds,the
const r
uct i
oni ndustryis“ asect oroftheeconomywhi ch,thr ough
planning, design,construct ion, mai ntenanceandr epai r,
andoper ation,
tr
ansf ormsv ari
ousr esour cesi ntoconst r
uct edf acil
iti
es”(Moav enzadeh,
1978, p.98) .Assuch, theconst ructi
oni ndust ryencompassesal lfi
rms
oror ganizations,whopr ofessi onallyengagei ntheconst ruct i
onpr ocess,
fr
om t hosepr ovi
dingconsul tancyser vicesi nt hepl anning, design,
super vi
sor yandmanager ial ser vicest ot hosecar ryi
ngoutexecut i
on
wor konsi t
esuchast hegener al contract orsandbui l
ders( Colean&
Newcomb, 1952; Ofori,1990) .Thesef i
rmsoror gani zati
ons, i
nturn,often
hav
eacloserelat
ionshi
pwithcl
ient
sandf i
nancer
s( Hil
l
ebrandt,
2000)
.
Thi
sphenomenoni sdir
ect
lyder
ivedfrom t
hecharacter
ist
icsofthe
i
ndust
ry’
sproducts,whi
charedescri
bedbelow.
Allt
het hreel evelsofdef init
ionoft heconst ructionindust ryareusef ul
.In
ordertoobt ainafullpictureoft heindustry,itisr easonabl etouset he
broadestdef i
niti
onment ionedabov e.Howev er,theot hert wonar r
ower
defi
nitionsar emor er elevantt ot hisstudy.I
ti simpor tantt oknow
whethert hef inalpr
oduct s,whi chisdef i
nedbyt henar rowestdef i
nit
ion
oftheconst ructi
onindust r
yisi ncreasingordecr easing.Thi stypeof
i
nformat ioni softenofgr eatimpor tanceforeconomi cpl anning
purposes( Of ori,
1990) .Ther ehav ealsobeenv iewsar guingt hat
construct ionshoul dbeconsi der edasapr oject-basedl ev eleconomi c
acti
vity( Gr oak,1994), orv i
ewst hatquest i
onedi fconst ruct i
onisone
i
ndust ry( Bal l
,1988;Nat ional Economi cDev elopmentOf fice,1978)or
several indust ri
es(Iv
e&Gr uneber g,2000).Howev er,
fort hepur poseof
thi
sst udy , whichanal yzesconst ruct i
oninrelationt oot hereconomi c
acti
viti
es, t
heconceptofonei ndust rywouldbemor eappr opri
ate.
const ructioni ndust ryconsi stsofdwel li
ngs, officebui l
di ngs, storesand
otherpubl icandut il
itybui ldings, farm buildings, et c.
, orheav y
const ruct i
onssuchashi ghway s, str
eets, br
idges, tunnel s, rail
way s,
airfi
elds, har borsandot herwat erpr ojects,i
r r
igat i
onsy st ems, sewer age
sy st
ems, indust r i
al facili
ties, pipelinesandel ectricl i
nes, spor tsfaci l
it
ies,
etc.Mor egener al l
y ,output soft heconst ruct i
oni ndust ryar egr ouped
i
nt ohousi ng, i
nf rast ructure, indust ri
alandcommer cialbui ldings, and
repairandmai ntenance( Gr uneber g,1997; Wel l
s, 1986) .Anot herwayt o
classifyconst ruct ionout put sist ogr oupt hem i nt ociv i
l engi neeringwor k,
bui l
dings, andr epai rsandmai ntenance.Ci vi
l engi neer i
ngwor kincl udes
transpor tf acil
ities, telecommuni cationandpowernet wor ks, water
suppl ies,et c.Bui ldingsi ncl udehousi ngandt her emai nder( hospi tals,
school s,offices, fact ori
es, hot elsandagr icultural buildings)( Wells,
1985) .

Const ructi
onpr oductsarenotmasspr oducedcommonl y.Each
constructi
onpr oductisonlyconst r
uct edaf tert hecli
entdecidest o
procureit.Custom- bui
ltnat
ur eortheone- of-a-kindnatureof
constructi
onout putsisfeaturedbydi fferentcl i
entswi t
hdi f
ferentneeds
andpr i
oriti
es,bydiffer
entsites,andbydi fferentv i
ewsofdesi gners
(Ofori
,1990) .Productsoftheconst ructioni ndust r
yareimmobi l
e;they
arefi
xedt ot hesitewher et
heywi llbeused( Colean&Newcomb, 1952).
Thepr oductsareconst ruct
edonsi teaswel l.Asar esult
,the
constructi
onpr ocessdependsnotonl yont henat uralcondi t
ionsoft he
sit
ebutal soont helocal resour cessuchast hel ocallabourf orce, l
ocal
subcont r
actors, l
ocal buildingmat erialssuppl iers,l
ocal regulat
ions, etc.
Compl exit
yofconst ructionpr oduct sfollowsf rom theircust om- built
natureandsi t
epr oduction.Thehi ghdi versityofcust omer s’
requir
ement sandsi tecondi ti
onsr esultinawi derangeofmat erials,
technological
r equirement s,desi gnsol utionsandconst ruct i
onmet hods
ofvaryingdegr eesofcompl exity.Anot herr easonf orthecompl exi t
yi s
thenumberofdi f
ferentt eamsf rom differentpar ti
esinv olvedint he
constructi
onwor ks( Ofori,1990) .Eacht eam wi t
hdi f
ferentpr ofessi onal
practi
ces,speci ali
zingindi f
fer entoper ationsof tenleadst oa
compl i
catedor ganizat i
oni nt heconst ructionpr ocess.Theor gani zation
i
sobv iouslyonl ytempor ar yf orapar t
icularpr oduct.

I
nfr
ast
ruct
ure
Infrastructureint heconst r
uctioni ndust r
yi sgener allyrelatedto
economi cinf r
astructure.Economi cinfrastruct ureisconst ructedt o
facili
tateot hereconomi cactivi
tiesoft henat ionaleconomy .
Dev elopmenteconomi stsof t
enr efertoinfrast ructureas“ social
over headcapi t
al”orpubl i
cinfrast r
ucturecapi talsinceithast raditi
onall
y
beenownedandmanagedbyt hepubl i
csect or( Howes&Robi nson,
2005) .Someot herbroaderdef initi
onsofeconomi ci nf
rastructurealso
i
ncl udeof fices,shops, housing, f
act ori
es,war ehouses, industrialparks,
school s,hospi t
als,etc.(Mill
er,2000; Howes&Robi nson, 2005) .The
economi cinf r
astructureasdef inedbyt heWor ldBank( 1994)i st hemost
suitableoneadopt edforthisst udy .Accordi ngt othedef i
niti
on, t
hereare
threemai ngr oupsi neconomi ci nfrastr
uct ure:
 Publi
cutil
i
ties—power,t
elecommunicat
ions,pi
pedwat
ersupply
,
sanit
ati
onandsewer age,soli
dwast
ecol l
ect
ionanddi
sposal
,and
pipedgas.
 Publ
icworks—roadsandmaj
ordam andcanal
wor
ksf
ori
rr
igat
ion
anddrai
nage.
 Othert
ranspor
tsect
ors—urbanandint
er-ur
banr
ail
ways,ur
ban
tr
ansport
,port
sandwaterways,andai
rport
s(Worl
dBank,1994,
p.
2).
Theconceptofinf
rastruct
urebytheWorl
dBank(1994)hasbeenwi del
y
adoptedi
nmanynat ional,
regi
onalaswel
lasint
ernat
ional
economi c
studi
esandreport
s(Par ki
n&Shar ma,
1999;
ESCAP, 1994;Kohsaka,
2006;Mody,1997)
.
St
ruct
ureoft
heConst
ruct
ionI
ndust
ry
Bynat ureoft hewor k, thest r uctur eoft heconst ruct ioni ndust rycanbe
charact erizedbyt ypeofpr oduct ,sizeofcont ract ,compl exi tyand
geogr aphi callocationoff inishedpr oduct s( Wor ldBank, 1984) .Byt ype
ofpr oduct , t
heconst ruct ioni ndust ryconsi stsofconst ructionf i
rms
speci ali
zingi nr esi
dent ial ,indust rial andcommer cial bui l
dings, and
i
nfrast ructureorci v i
l engi neer i
ngwor ks.Theconst ructioni ndust r
ycan
al
sobest ruct uredbysi zeofcont ractanddegr eeofcompl exity.Lar ge
const ructionf ir
msusual l
yunder takel argecont r
act swi thhi ghdegr eeof
compl exit
y .Thet echni cal aswel lasmanager ial skillsar et het womaj or
advant agest hatlargeconst r uctionf ir
mshav eov ert hesmal lfirms.Thi s
explainst hatt hepot ent i
al compet itorsf orl argeci vilengi neer ingwor ks
areof tenl argeconst ruct ionf irms.Geogr aphi cal locat ioni sal soan
i
mpor tantdet erminantoft hest ruct ureoft heconst ruct i
oni ndust ry.
Const ructionf i
rmsar eusual lymar ket -
locat ed( Gr uneber g, 1997) .
Becauseconst ructi
onpr oducti schar act erizedbysi te-product ion,most
const ructionf ir
msneedt oconsi dert het ranspor tationcost sof
mat erials,equi pmentandl abourt ot hepr oduct ionsi te.Bey ondacer t
ain
geogr aphi calar ea,thesecost sbecomeexcessi vei nr elationt oot her
costs, thusr ender i
ngt hepr oject ’
spr of i
tabi l
ityunat tractive.Onl yfor
l
argecont ractswoul dt hepr opor tionoft ranspor tat ioncost si nt otal
costsbecomesmal lenough, sot hati tisst i
llprof it
abl ef orf irmst o
under taket hej obsf ar t
heraf ield.Forv eryl argepr oject s, f
irmsmi ghtset
upal ocal officetor educet r anspor tat i
oncost s,butt hent hesef i
rmswi l
l
needt oconsi dert heat tendantov er headsassoci at ed( Hi l
lebr andt ,2000).
Bypat ternofpr oduct i
onor ganizat ion, t
hisst udyfocusesont hef ormal
sectorr athert hant heinformal one.Wi t
hi nthef or
mal sect or ,the
str
uct ureoft heconst ructi
oni ndust rycanbecl assif
iedi ntopubl i
cand
pri
vatef irms, anddomest icandf oreignf irms.Publ i
cf ir
msar estat e-
ownedent erprises, whichar eof tenpr otectedbyt hegov er nment .The
establishmentoft hesepubl icent er pri
sesi sessent i
al tot akeonwor ks
whichar eunat t
r act iv
et opr i
vatef irmsorasr equiredbyt hegov ernment ,
orper form asasour ceofpr ov i
dingt henecessar ytrainedl abourf orthe
developmentoft heconst ructi
oni ndustry .Meanwhi le,pr i
v ate
contract orscont ribut etot hedev el opmentoft heconst ruct ioni ndustry
bythei rcompet iti
v eness, effi
ciencyandf lexibi
li
ty.Onemor enot i
ceabl e
pointint hest ruct ureoft heconst ruct i
oni ndustryist hepar ticipationof
i
nternat i
onal cont r actors.Theirpr esencecanmaket hecompet it
ion
mor edi ffi
cultf ordomest icfirms.Howev erdomest i
cf irmswi llbecome
str
ongeri nthepr ocess.Thest ruct ureoft heconst ructioni ndust rycan
bequi tedi ff
er entamongcount riesdependi ngont hesoci al and
economi cenv i
ronment ssuchast hedev elopmentst at eoft heeconomy ,
gover
nmentpol
i
cies,
andt
het
radi
ti
onsofdoi
ngbusi
ness(
Wor
ldBank,
1984)
.
Got
o:

Maj
orEconomi
cFact
orsI
nfl
uenci
ngConst
ruct
ionAct
ivi
ty

I
nst
abi
l
ityofDemand
Const r
uct i
ondemandi si nher ent l
yv olat i
le.Wi def luct uat i
onsi n
const ruct ionout putsar ecommon.St udy inganumberofcount rieswi th
diff
er enti ncomef rom v ariouspar tsoft hewor ld, theWor ldBank( 1984)
i
ndicat edt hatt hef l
uct uat i
onofconst ruct ionout put swasmor et hanhal f
ofthemanuf actur i
ngsect orandt heeconomyasawhol e.Ast udyoft he
Europeanr egionbyt heUni tedNat i
ons( 1976)camet ot hesame
concl usi ont hatt heconst ruct i
oni ndust ryexper iencedst ronger
mov ement sofbusi nesscy clet hanot hereconomi csect or s.These
fl
uct uat ionsar epar tlyduet ot henat ur eofconst ruct i
ondemandand
partlyduet ot henat ureofconst ruct i
onpr oduct s.Demandf or
const ruct ionout putsi sconsi der edder iveddemandf rom ot her
economi cact i
viti
es( Uni tedNat i
ons, 1976; Hi l
lebr andt ,2000) .Out putsof
theconst ructioni ndust ryar einv est ment -
goods, whi char epr oducedt o
faci
litat et hecr eat i
onofot herconsumpt ion- goodsandser vices.I not her
wor ds, theconst ructioni ndust ryitsel fcannotcr eat et hedemandf orits
output s( Nam &Tat um, 1988) .Demandf orconst r uctioni st her efor e
l
argel ydependentont hebusi nessact ivitiesofot hergoodsandser vices
thatt heconst ructionpr oduct shel pcr eat e.Fol lowi ngt heupsanddowns
oftheeconomy ,thedemandf orconst ruct ioncangot hr ought he
mov ementofabusi nesscy cleear l
ierandmor est rongl yt hanot her
sector sbecauseoft henat ureofi tspr oduct s( Riggl eman, 1933; Uni t
ed
Nations, 1976) .Aconst ruct i
onpr oducti si mmobi leandi sof ten
const ruct edonl yaf tert hecl ientr eal izest hedemand.Thi snat ureof
const ruct ionpr oduct smakest hei ndust ryunabl et ost ockuppr oduct s
forsal e.Hence, whent her ei sasuddeni ncr easei ndemand, thei ndust r
y
cannotr espondt ot hedemandqui ckl y( Uni tedNat ions, 1976; Nam &
Tatum, 1988) .Thef luct uat i
onsofconst ruct iondemandcanbev ery
l
arge, thusaf fectingt heeconomyconsi der abl y.Thei mmobi l
ityandt he
durabi lit
ypr opertiesal somakeconst ruct iondemandgeogr aphi cally
dependent .Demandf orconst ruct ionwi t
hi nageogr aphi cal areawi llat
somet imei nthef utureex per i
enceasubst ant ialfal landsuf fer
satur ationwhenmuchoft hedemandi nt hear eai smetandt heexi sting
faci
litiesar est i
lleconomi cal tomai nt ain( Col ean&Newcomb, 1952;
Hill
ebr andt ,2000) .
Apar tfrom t heabov ement ionedf act ors,thest agesofeconomi c
developmentaswel last hest ructur al changesal sohav esignificant
i
nf l
uencesont hegr owt hr at eofdemandf orconst ruct i
onaswel lasthe
composi ti
onsofdemandf orconst ruct i
onov ertime.Ast udybyt he
UnitedNat ions( 1976)poi ntedoutt hatt hef l
uct uat i
onsi nconst ructi
on
acti
v i
ty,wi thref erencet ot hoseofot hereconomi csect ors,tendt obe
greateri ndev elopi ngt hani ndev elopedcount r
ies.I ndev eloping
count ri
es, thedemandf orinf r
astruct ur alfacili
ti
esi soft hegr eat est
propor t
ioncompar edwi thot herconst ructi
ondemands.Si ncei nt he
i
niti
al stagesofdev elopment ,i
nfrast ructurei sofgr eati mpor tancei n
creatingt hef ramewor kf ort heeconomy ,spendi ngonbui ldingnew
i
nf r
ast r
uct urei nt hesest agesi sr elativelyheav y( Lewi s,1955) .Asa
result,t
heshar eofconst ruct i
onexpendi tureonpubl i
cwor ksandpubl i
c
uti
li
tiessuchashar bour s,rai l
way s, roads, electricity,etc.,i
nt hel ess
developedcount ri
esar eof tenhi ghert hant hatint hemor edev eloped
count ri
es( Lewi s, 1955) .St ructural changessuchaschangesi n
developmentgoal s, pri
or it
iesofeconomi cgr owt hamongsect or s,and
changesi ndemogr aphicscanal soi mpactt hedemandf orconst ructi
on
(UnitedNat ions, 1976) .TheWor ldBank( 1994)obser vedt hatas
count ri
esdev elop, infrast r
uct uremustadaptt osuppor tchangi ng
patternsofdemand.

Sour
cesofFi
nance
Financi ngpr oduct i
oni nconst r
uctionisqui tedifferentf rom t hatin
manuf act uring.Thepr oduct i
oni nconst ructionisf inancedl ar gelyby
cli
ent s, rathert hant hecont ractors,thepr oducersofconst ruct ion
product s.Att het opoft hepay mentchai nint heconst ructi
oni ndustry
aret hecont ract orsandatt hebot tom ar ethesubcont ractor sandt he
suppl iers.Cont ract orsrecei v
eadv ancepay mentsandper iodi cpay ments
tomobi l
iz eresour ces( l
abour ,equipmentandmat erials)necessar yf or
theconst ructionpr ojects.Cashf lowofsubcont ract orsandsuppl i
ersare
therefor eal soaf fectedbyt hepay mentpr ocedur e.Thesour ceofcl ient’
s
fi
nancei sof teni nt hef orm ofbankl oansbackedbyt heconst r
ucted
facil
ityi tself.Althought hemaj orsour ceoff inancecomef rom cl i
ent s,
thecont ract orsi nsomecount ri
escanobt ainbankl oansf r
om speci al
banks, whi char eest ablishedt oassi stthef i
nanci ngofconst ructi
on
wor ksandi nv estment si ntheconst ructionindust ry.Ot herfor msof
fi
nanci al assistancet hathel pcont ractorsgetst artedi nheav y
const ruct ionwor kscani ncl
udesuppl i
ercr edit,
directl oansf r
om
commer cialbanks, andt heestablishmentofcompani est hatl easeand
hireequi pment( Wor ldBank, 1984) .
Cont
ract
ors’
financi
alconcer
nscanbedi
ff
erentacr
osst
heconst
ruct
ion
phasesandt hetechnologyempl oy ed.Thei ni
ti
alstagesofmobi l
ization
requi r
eal argeamountofcash, especi al
lyforcontractorsusi ngthe
equi pment -
intensi
v econstructi
ont echnologytopur chaset heequi pment .
Meanwhi l
e,cashflowatt helaterst agesofanunev ent f
ul construction
oper ati
oni sgenerallymor establ e.Delayedpay ment sanduncer taintyof
cashf l
owar ecommoni ntheconst ructi
oni ndust
ry( Wor l
dBank, 1984).
Thepr oblem hascont i
nuallyraisedconcer nsinconst r
uctioni ndust r
ies
throughoutt hewor l
d,al
thought hepr obl
em canbemor eser iousi nthe
dev elopingcount r
ies.Paymentpr obl
emswer econsi deredaf actort hat
canhampert heheal t
hydev elopmentoft heconst r
uct i
oni ndust r
y( Wuet
al.
,2008) .
Inthedev elopingcount ri
es, fi
nanci al aidsf ort hemaj orconst ruction
project slargelycomef rom t hegov er nmentori nt ernat ionalagenci es.
Thisi sbecauseani nfrast ructur alconst ruct i
onpr oj ectisof tencapi t
al-
i
ntensi ve, andduet oi tspubl icgoodchar acteristics, isnotdi rectlyseen
tobef easiblef r
om t hev iewpoi ntofi ndi vidual pr ivat einvestor s.For
exampl e,anewt ranspor tat i
onf acilitycoul dbr ingabouti mpr ovementi n
theper f
ormanceofal lindi vi
dual firms.Howev er ,itisnoti nt hei nterests
ofani ndividualf i
rmt oaddr esssuchi ssues.Mor eov er,thehi ghcostof
i
nv est mentmayr endert her eturnsf rom t hepr oj ectunenv i
abl e.
Meanwhi le, theex t
er nal ef f
ect soft heconsumpt ionofsuchgoodsby
thewhol ecommuni tycangobey ondt hebenef itst oi ndivi
dual i
nv estors.
Inot herwor ds,thesoci al rateofr et ur nsf rom suchi nvestment sishi gher
thant hepur elypr ivater at eofr eturn.I nt hatcase, itist heresponsi bil
it
y
ofthegov ernmentt opr ov idet hei nv est ment -goodsf ortheeconomyas
awhol e.Consequent ly,publ ici nvest ment sf ormt hemaj orsour ceof
demandf orconst ruct ioni nt hesecount ri
es.I nsuchasi t
uation, the
gov ernmentandt hesei nt ernat i
onal agenci escanexer tgreati nfluence
ont hel evel ofconst ruct i
onact ivi
tyt hr ought heirl oancondi tions
(Moav enzadeh, 1978) .Ther efor e,inv est ment si nt heconst ruct i
on
i
ndust rycanbeusedasagov er nmentt ool toint roducedesi redchanges
i
nt heeconomy( Lea, 1973; Ofor i,1988; Lange&Mi lls,1979; United
Nat i
ons, 1976; Hillebr andt ,2000; Howes&Robi nson, 2005).Thi swoul d
beex aminedf urtherbel ow.
Howev er,
somei nfrastructuralf
acili
ti
esar equasi -
publicgoods.Thatis,
i
nfrastr
ucturedisplay spubl i
cgoodpr oper t
iesupt oacertai
npoint.
Whent heinfrast
r uctureget soverlycongest ed,itdimini
shesthebenef i
ts
ofotherusers.Att hispoi nt,t
hereisrivalr
yint heconsumpt ionof
i
nfrastr
uctureser vi
ces, andposi t
ivemar ginal cost.Thepriv
ategood
character
isti
csofsomei nf r
astr
ucturalfacil
iti
esmakei tmoreproductive
forthepri
v at
esect ort opr ovi
de(Howes&Robi nson,2005).Asaresult,
ther
ehasbeenashi f
tawayf rom publi
cdemandt opr i
vatedemandf or
i
nfrast r
uctural const r
uctioni nmor edev elopedcount ries( Colean&
Newcomb, 1952; Hi l
lebrandt,2000) .Onl yasmal l
par toft hedemandi s
publ i
cdemandi nt hesecount r
iesbecauseofnat ional secur i
tyissues.
Althoughi nfrastructureinsomedev elopingcount ri
eshasst art
edt obe
pri
v ati
zed, government sofmostdev elopingcount r
iesst i
ll ownand
fi
nancenear lyallinfrastructure( Col
ean&Newcomb, 1952; WorldBank,
1994) .Recent l
y ,t
hedev elopmentofnewar rangement sofbot hprivat
e
andpubl icf i
nanci ng( i
.e.public-pri
vatepar t
nershiporPPP)has
broadenedt hepr ov i
sioncapaci tyofi nfrastructur
al construct i
on
(Hill
ebrandt ,2000; Howes&Robi nson, 2005) .

CommonSour
cesofConst
ruct
ionFi
nanci
ng

Accesstof
inanci
ngisi
mportantf
oranyconstructi
oncompany .Forthi
sreason,i
t'
s
i
mpor t
antt
ounderst
andthevari
oustypesoflendersthatar
eoutt her
e.Fr
om heavy
equi
pmenttocrewwagestoinsur
ance,majorconstructi
onproj
ectsrequi
reseri
ous
fi
nanci
ngtogetofft
heground.
Whatar
esomecommonsour cesofconstr
uct
ionf
inanci
ng?Ther
ear
eei
ght
commonsour
cesofconst
ructi
onfinanci
ng:

1.Commer cialbanks
2.Savi
ngsandl oanassociati
ons
3.Mutualsav i
ngsbanks
4.Mortgagebanki ngcompani es
5.Li
feinsur ancecompani es
6.Realestat einvestmenttrusts
7.Governmentagenci es
8.Alt
ernatesour ces

Howev eryouchoosetofinanceyourconstructi
onproject
,itisessenti
alt
hatyouget
yourfundi
ngquickl
ysoy oucangetst ar
ted.Mostcommer cialconstr
ucti
onloansare
setupinlayer
s,wherethebor r
owercandr awonaschedul easspeci fi
cstepsofthe
proj
ectgetcompleted,
soy oumusthav eatl eastenoughfundinginplacetobreak
ground.
Suppl
yanddemand
Supplyanddemand, ineconomi cs, r
elati
onshi pbetween
thequantityofacommodi tythatproducer swi shtosellat
vari
ouspr icesandt hequant i
tythatconsumer swishto
buy.Itisthemai nmodel ofpricedetermi nationusedi n
economi ct heory.Thepr iceofacommodi t
yi sdeter
mi ned
bythei nt
er acti
onofsuppl yanddemandi namar ket.The
result
ingpr icei
sr eferredtoast heequi l
ibrium pri
ceand
representsanagr eementbet weenpr oducer sand
consumer soft hegood.I nequi l
i
brium thequant i
tyofa
goodsuppl i
edbypr oducersequal sthequant it
y
demandedbyconsumer s.
Thequant ityofacommodi tydemandeddependsont he
pri
ceoft hatcommodi tyandpot enti
allyonmanyot her
factor s,suchast hepricesofot hercommodi ti
es, the
i
ncomesandpr ef erencesofconsumer s,andseasonal
effect s.Inbasi ceconomi canal ysis,allfactorsexceptt he
pri
ceoft hecommodi t
yar eoftenhel dconst ant;the
anal ysistheni nv olvesex aminingt her elati
onshipbet ween
variouspr i
cel ev el sandt hemax i
mum quant it
yt hatwoul d
potent iall
ybepur chasedbyconsumer sateachoft hose
pri
ces.Thepr ice-quant it
ycombi nati
onsmaybepl ot t
edon
acur ve,knownasademandcur ve,wi thpricerepr esented
ont hev erticalaxi sandquant i
tyr epresent edont he
horizont al axis.Ademandcur v eisalmostal way s
downwar d-slopi ng, ref
lecti
ngt hewi l
lingnessof
consumer st opur chasemor eoft hecommodi t
yatl ower
pri
cel evels.Anychangei nnon- pricef actorswoul dcause
ashi ftint hedemandcur ve,wher easchangesi nt hepr i
ce
oft hecommodi tycanbet racedal ongaf ixeddemand
curv e.
 i
ncr
easei
ndemand

Suppl
yCur
ve

Thequant i
tyofacommodi tyt hati ssuppl i
edi nt he
mar ketdependsnotonl yont hepr i
ceobt ainabl efort he
commodi tybutal soonpot ent i
allymanyot herf actors,
suchast hepr icesofsubst itutepr oduct s, thepr oduct ion
technol ogy ,andt heav ail
abi li
tyandcostofl abourand
otherf actorsofpr oduct i
on.I nbasi ceconomi canal ysis,
anal yzi
ngsuppl yi
nv olvesl ooki ngatt her el at i
onshi p
bet weenv ariouspr i
cesandt hequant i
typot ent iall
y
offeredbypr oducer sateachpr ice, againhol dingconst ant
allotherf actor sthatcoul di nfluencet hepr i
ce.Those
price-quant i
tycombi nat ionsmaybepl ot
tedonacur ve,
knownasasuppl ycur ve,wi thpr icer epresent edont he
verticalaxisandquant it
yr epr esent edont hehor i
zont al
axis.Asuppl ycurvei susual lyupwar d-sl
opi ng, refl
ect ing
thewi l
l
ingnessofpr oducer st osel lmor eoft he
commodi tytheypr oducei namar ketwi t
hhi gherpr ices.
Anychangei nnon- pricef act orswoul dcauseashi ftint he
suppl ycur ve, whereaschangesi nt hepr iceoft he
commodi tycanbet racedal ongaf ixedsuppl ycur ve.
 decr
easei
nsuppl
y

I
ll
ust
rat
ionofani
ncr
easei
nequil
i
bri
um pr
ice(p)andadecreasei
nequi
l
ibr
ium quant
it
y(q)
duetoashif
tinsuppl
y(S)
.

 Thelawofdemandsay st hatathigherpr i
ces,buyer
swi l
l
demandl essofaneconomi cgood.
 Thelawofsuppl ysaysthatathigherpr ices,sel
l
erswill
suppl
ymor eofaneconomi cgood.
 Theset wol awsinter
acttodet er
mi netheact ualmarket
pri
cesandv ol
umeofgoodst hataret r
adedonamar ket.
 Severalindependentfactorscanaf fecttheshapeofmar ket
suppl
yanddemand, inf
luencingbot hthepr i
cesand
quantit
iest hatweobserveinmar ket s.
 Whyi
stheLawofSuppl
yandDemandi
mpor
tant
?
 TheLawofSuppl yandDemandi simpor tantbecausei t
helpsi nvestors,
entrepreneur
s, andeconomi st st o
under standandpr edictconditi
onsi nt hemar ket .For
exampl e,acompanyt hatisl
aunchi nganewpr oductmi ght
deli
ber atelytryt
oraiset hepri
ceoft heirproductby
i
ncr easingconsumerdemandt hr oughadv er
t ising.Att he
samet ime, t
heymi ghttrytofurtherincreaset hei rpri
ceby
deli
ber atelyrest
ri
ctingthenumberofuni tstheysel l
,i
nor der
 todecreasesuppl
y.I
nthi
sscenar
io,
suppl
ywouldbe
mi ni
mizedwhil
edemandwouldbemaximized,
leadi
nga
higherpri
ce.
 Whati
sanexampl
eoft
heLawofSuppl
yandDemand?
 Toill
ust r
ate, letuscont i
nuewi ththeabov eexampl eofa
companywi shingtomar ketanewpr oductatt hehi ghest
possiblepr i
ce.I nordertoobt ainthehighestpr ofitmar gins
possible,thatsamecompanywoul dwantt oensur et hatit
s
productioncost sareasl owaspossi ble.Todoso, i
tmi ght
securebi dsf rom alargenumberofsuppl iers,aski ngeach
suppli
ert ocompet eagai nstone-anothertosuppl yt he
l
owestpossi blepri
cef ormanuf actur
ingthenewpr oduct.In
thatscenar io, t
hesuppl yofmanuf acturer
sisbei ng
i
ncreasedi nawayt hatdecr easesthecost( or“ price”)of
manuf acturingt heproduct .Hereagain,weseet heLawof
SupplyandDemand.

Nat
ureofHumanWant
s
Allt
hedesiresandaspirat
ionsandmot i
vesofhumans
areknownashumanwant sineconomics.Andthe
wantsthatcanbesat i
sfi
edwi t
hgoodsandser vi
ces
ofanykindareeconomi cwants.Likef
orexample
food,shel
ter,
clot
hing,
etcareeconomichuman
wants.Andt hosewhichcannotbeboughtar enon-
economi
cwant
sli
kepeace,
lov
e,af
fect
ion,
etc.

Allhumanwantstohavesomebasi
ccommon
charact
eri
sti
cs.
Letushaveal
ookatthesi
mil
ar
natureofhumanwants.

 Wantsar
eunli
mited.Ahumanisnevert
rul
ysati
sfi
ed,
andsohiswant
st oar
eendl
ess.Wemayt emporar
il
y
sat
isf
ysomeofourwantsbuttheyal
waysreoccur
.
 Dif
ferentwant
shavevar
yingdegr
eesofi
ntensit
y.
Somewant sareex
tremel
yurgent
,someareless
i
ntense.
 Humanwant stendt
obecompet it
ive.Wehave
l
imit
edmeansandsowecannotsat isf
yall
ofour
wants.Sotheycompetewi
theachot her
.Andthe
mosturgentwantwil
lbesat
isf
ied.
 Wantscanbecomplement ar
yaswell
.Tosat
isf
your
wantforonegoodwehavet o
makearrangement
sforanother
.Sonowwehav et
he
wantoftwogoods.Forexampletor
unacaryou
needpetr
ol.
 Thewant sofanyper
sonwi
l
lconst
ant
lybechanging
accordi
ngtotheti
meandpl
aceandsi
tuat
ionofthe
person.
 Overti
mewant
sofaper
soncanbecomehi
shabi
ts
orcust
oms.
Cl
assi
fi
cat
ionofHumanWant
s
Wecancl assi
fywantsi
ntothreebroadcategori
esi
n
economics.TheseareNecessari
es,Comforts,
and
Luxuri
es.Letustakealookatall
three.

1]Necessar
ies

Thesearethehumanwant sabsolutelyessenti
alfor
l
ivi
ngandsurv i
vi
ng.Fur thernecessarieswi l
ldi
vi
de
i
ntonecessari
esf orli
fe, f
oreff
ici
encyandf i
nal
ly
convent
ional
necessar ies.Fi
rstandmosti mportant
wantsareobviouslynecessariesforlife.These
i
ncludefood,water,cl
ot hi
ng,shel
ter,etc.

Andthent her
earenecessar i
esthati
mpr ove
oureffi
ciencyandwel lbeingli
kecomf or
tabl
ehousing,
nouri
shingf oods,et
c.Finall
y,t
hereareconvent
ional
necessariesthatari
seoutofhabi t
s,cust
omsor
conventi
ons.

2]Comf
ort
s

Thesearet heext
rawant softhehumanaf ter
necessari
es.Theyar enotasessent ialorurgentas
necessari
es.Comf ortsarethewant sthatmaket he
l
ifeofthehumancomf ort
ableandsat isfyi
ng.
Generall
y,thesei
ncludei t
emst hatsav elabouron
behalfofthehumanorpr ovi
decomf orttohimi nhi
s
l
ife.Soit
emssuchasf ans,f
urnishedhouses, special
cl
ot hi
ngforoccasi
ons, etcfallunderthiscategoryof
humanwant s.
3]Luxur
ies

Thesear egoodsthatgiv
ehumanspl easur
eand
prest
igeinsociet
y.Theyarenotneededforexi
stence
orcomf ortbutpr
ovidehappi
nessandacceptancein
theworld.Thesewantsmaybecal l
edsuperfl
uous.
Andsuchi temstendtobeexpensive.

Someex amplesofluxuri
esarecar
s,di
amondjewelr
y,
expensi
vedesignercl
othi
ng,ACs.Asyouwil
lnoti
ceall
theseit
emsarenotessent i
alt
oourli
vi
ng.Theyar
e
i
temsofprestige.
CI
TYMODELS
Concent ri
cZoneModel( alsoknownasBur gessModel )i san
attemptt o under stand spatialar rangementand set tlement
patterns.Ur banar eashav ebeenanar eaofr esearchf oraf ew
decades now.The waypeopl el ive,interactand behav e has
alway sbeen an i nt er
esti
ng topic.Wi t hthei ncreasei n ur ban
popul ationov ertimeandt heincreasei nur bandev elopment ,we
humanshav ei nhabitedalmostal lpar t
sofEar th.Humansl ivein
deser tar eas,f l
oodpl ai
ns,tropi
calar eas,cold areasandj ust
any wher etheyar edet erminedto.Thi shasbeenpossi blewi t
ht he
i
ncr easi ngtechnologyadv ancementandt hepowert ocont r
ol&
regulatet hesur rounding.Forhumansadapt at
ioncomesl ateras
modi ficati
onofsur r
oundingdomi nates.Thi sisclearlyr eflected
wheny oulookathumanset tl
ement sonawor l
dmap.

A.Thecit
ygrowsout
war
dsintheform offi
veconcent
ri
czonesorr
ings
aslongasther
ear
enophysi
calbar
ri
ers,suchasri
versorhi
l
lstodi
stor
t
thepat
ter
n.
B.Theci
tyhasasi
ngl
ecent
re.
C.Gr
owt
hisaccompli
shedbyasi
mpl
eext
ensi
onofeachzoneout
war
ds
i
ntot
henextzone.
Thechar
act
eri
sti
cfeat
uresofeachoft
hef
ivezonescanbedescr
ibedas
fol
l
ows.
ZoneA:Thecent
ralbusi
nessdi
str
ict(
C.B.
D)
Iti
sthehear toftheurbancommuni t
ywher ethecommer ci
al,
socialand
civ
icact
ivit
iesareconcentrated.TheheartoftheC.B.D.ort
hedownt own
corehasof ficebuil
dings,departmentalstor
es,theatr
es,hot
els,banks
andcivi
cgov er
nmentbui l
dings,whil
eoutsidethi
scor earewarehouses
andli
ghtindustry.
ZoneB:Thet
ransi
ti
onzonenextt
otheC.
B.D
Iti sthe tr
ansiti
on zone wher et he centralbusiness acti
vit
ies and
factor
iesmixandi nvadeanar eaofagi ngr esi
dent
ialdwell
ings.Thisis
alsothezoneofr esident
ialdecaywheret henewmi grantscomeandl i
ve
becausether entsarelowandt ransport
at i
oncoststot heworkplaceare
mi ni
mal.Thus,thesearethesitesofurbansl ums.
ZoneC:Thezoneofi
ndependentwor
kingmen’
shome
Thiszonei sinhabi
tedbyt heblue-col
larworkerswhoaregeneral
lyt
he
secondgener ati
onmi grants.Thesepeoplehav ethecapaci
tyt oown
thei
rindi
vidualhousesawayf rom theC.B.D.,butst
il
lli
vewithi
neasy
accessoft hei
rworkplace.Here,thefamil
ygr oupsar
emor establ
eand
cri
mer at
esar elower.
ZoneD:Thezoneofbet
terr
esi
dence
Thenextconcentr
icz
onehasmiddl
eanduppercl
assresi
denceswhich
areappr
oxi
mat el
y15to20minut
esbypubl
i
ctr
anspor
tfrom zone1.
ZoneE:Thecommut
erzone
Thisouterzoneenci
rcl
est hecityandliesbeyondtheconti
nuousbuil
t-
up
areas.Muchoft hiszonei sst il
lanopenspaceandi softenlocat
ed
beyondt heci
tyli
mit
s.Her e,smallvil
lages,sur
roundedbyopencountry,
gradual
lybecomesubur bs.Sincepeopl einthi
szonewor kintheC.B.
D.,
thecommut erzoneislocatedwi thi
nonehour ’
st r
avel
li
ngti
mef rom t
he
centreoftheci
ty.
Burgessstressedt hatt
heoutwardgrowthofthecityimpli
esthateach
zoneisnotst at
ic.Businessact
ivi
ti
esexpandintothet r
ansi
ti
onzone
whichforcesl ow i
ncomegr oupstomov eoutwards.Thisgroup,then,
displ
acesthemi ddl ecl
assandt hewealt
hythat,i
nt ur
n,areforcedto
mov eout
war ds.
1.
HOMERHOYT( 1895–1984)HomerHoy t( 1895–1984)wasal andeconomi st ,ar eal
est ateappr aiser , andar eal estat econsul tant .Inhi sl ongandaccompl ishedl ife,he
conduct edpat h-br eaki ngr esear chonl andeconomi cs, dev elopedani nf luent ial
appr oacht ot heanal ysisofnei ghbor hoodsandhousi ngmar ket s, refinedl ocal ar
ea
economi canal y sis, andwasamaj orf igur ei nt hedev elopmentofsubur banshoppi ng
cent ersi nt hedecadesaf terWor l
dWarI I.Hi ssect ormodel ofl anduser emai nsone
ofhi smostwel l-knowncont ribut ionst our banschol arshi p
2.3.Sect orModel theor yofur banst ruct ureal soknownasHoy tModel dev el opedi n
1939byHomerHoy tst atest hataci tydev elopsi nsect or s, notr ingscer tainar easar e
mor eat tract i
v ef ordi ffer entact ivitiesbecauseofanenv ironment al fact ororbymer e
chance.Hoy tmodi fi
edt heconcent riczonemodel toaccountf ormaj or
transpor tationr out esaccor di ngt ot hismodel mostmaj orci tiesev olvedar oundt he
nex usofsev eral impor tantt ranspor tf aci li
t i
essuchasr ai l
roads, seapor ts, andt rol
ly
l
inest hatemi nat edf r
om t heci ty '
scent er .Hoy tt heor i
z edt hatci tieswoul dt endt o
growi nwedge- shapedpat terns, orsect or s, emi nat ingf rom t heCBDandcent eredon
maj ortranspor tat ionr out es.
3.4.I tisamonocent ricr epr esent at i
onofur banar easHeposi tedaCBDar oundwhi ch
otherl andusescl ust erButi mpor tantf act ori snotdi st ancef rom CBDasi nt he
concent ricz onemodel , butdi rect i
onawayf rom CBDAsgr owt hoccur s,si mi lar
act ivit
iesst ayi nt hesamear eaandext endout war dsTheHoy tmodel real i
z edt hat
transpor tation( inpar ticul ar)andaccesst or esour cescausedadi sr upt ionoft he
Bur gessmodel .Forex ampl ear ai l l
ineormaj orhi ghwayt oanear byci tymayr esultin
busi nessdev elopmentt opr eferent iall
ydev eloppar allel tot her ail li
neormaj or
highway .Soonesi deofaci tymaybecompl etelyi ndust rialwi t
hanot hersect ormay
becompl etelyr ur al.
4.5.DI FFERENTSECTORSI ndust ry•I ndust ryf ollowsr iv ers, canal s, railroads, or
roads•Lowercl asswor ker swor kher e.Pai dl ittl
e, badwor kingcondi tions.•
Pr oducesgoodsorot herdomest icpr oduct sf orci tyLowCl assResi dent ial •Low
i
ncomehousi ng•Nearr ailroadst hatf eedf act or iesor•I nhabi t
ant st endt owor kin
fact ories•Li veneari ndust r
yt or educet ranspor tat i
oncost s•Pol lut i
onorpoor
env ironment alcondi t
ionsduet oi ndust ry( traf fi
c, noi seandpol lut ionmakei tcheap)
Mi ddl eCl assResi dent ial •Mor edesi rabl ear eabecausei tisf ur therf rom i ndust ry
andpol l
ut i
on•Accesst ot ranspor t ationl inesf orwor kingpeopl ewhowor ki nt he
CBD, maki ngt r
anspor teasi er•Lar gestr esi dent i
al areaHi ghCl assResi dent ial•
 Housingonout er
mostedge•Fur t
hestawayf rom industr
y•Qui et,clean, l
esstraff
ic•
Corri
dororspineext
endingfrom CBDt oedgehasbesthousi ng.
5.6.+VE&- VEWher ei
tdoesanddoesn’ tappl
y(someweaknesses)Appl ieswell to
ChicagoLowcosthousingisneari ndustr
yandt r
ansportati
onpr ovingHoy t
’smodel
Theorybasedon20thcenturyanddoesnott akeintoaccountcar swhi chmake
commer ceeasierWi
thcars,peoplecanl i
veanywher eandfurtherfrom t hecit
yand
sti
l
l t
ravel
totheCBDusingtheircar .Notonl
ydohi gh-cl
assresident shav ecars,but
al
somi ddleandlowercl
asspeopl emayhav ecars.

1.
Harri
sandUl l
manar guedthatciti
esdonotgrowarounda
si
nglenucl
eusbutsev eralseparat
enuclei
.Eachnucl
eusactsli
ke
agrowthpoint.Thetheorywasf ormedbasedontheideat
hat
peopl
ehavegr eatermovementduet oincr
easedcarowner
ship..
..
Themodel i
ssui t
ableforl
arge,expandi
ngcit
ies.

2. C.
DHar risEdwardL.Ul l
manThe‘ Mul ti
pleNucleiModel ’wasgivenbyC.DHar r
isand
Edwar dL.Ullmanin1945. I
twaswr it
tenonaar ti
clenamed‘ TheNatureofCi t
ies’
.
BasicConcept :
Themodel descri
best helayoutofaci ty.I
tsaysthateventhougha
cit
ymayhav ebeganwi thaCent r
alBusinessDi str
ict
, orCBD,othersmallerCBD's
developont heoutskir
tsofthecitynearthemor evaluablehousingareastoallow
shortercommut esfrom theoutskir
tsoft hecit
y.Thiscr eat
esnodesornucl eiinother
 par tsoft heci tybesi dest heCBDt hust henamemul tiplenucl eimodel .
3.3.Thet heor yi sbasedupont henot iont hatt heci tieshav eanessent iall
ycel lular
struct ur e,i
nwhi chdi stinct i
v et ypesofl andusehav edev elopedar oundcer tai n
growi ngpoi nt s, or“ nucl ei”wi thint heur banar ea. Iti ssuggest edbyt hismodel that,
theci t yhav eacel lul arst ructur eandt hegr owt hoff ol l
owi ngcent ers–
4.4.Thenucl ei hav ebeenencour agedbyf ourf act or s,whi cht hedi st ri
but ionofhuman
act i
vitieswi thi naci tyinav ariesway s.Thesef act or sar e: 1. Thel ocat ionofCBD.
2.Concent rationofacer t
ainwor kinggr oup.3. Thecl osej ux taposi t
ionofhar mf ul
act i
vities4. Rentoft hemostdesi rabl esi te.Ef f ectsofmul tiplenucl ei onI ndust ryAs
mul tiplenucl ei '
sdev elopt ranspor tat i
onhubssuchasai rpor tsar econst ruct ed, these
transpor t
ationhubsal l
owi ndust r
iest obeconst ruct edwi thcheapt r
anspor tat i
on
cost s.TheseTr anspor tat i
onHubscanal socr eat enoi sepol lutionandl owerl and
valuessol andbecomescheap.Hot elsar eal soconst ruct ednearai r
por tsbecause
peopl ewhot rav el tendt owantt ost aycl osebyt ot heai rpor torsour ceoft rav el.
Housi ngdev elopsi nwedgesandget smor eex pensi vet hef artherf rom t heCBD.
(Swanson360- 364)
5.5.Reasonsoft hemodel Thet heor ywasf or medbasedont hei deat hatpeopl e
hav egr eatermov ementduet oi ncr easedcarowner shi p.Thi sincr easeofmov ement
allowsf orthespeci ali
z ationofr egi onal cent er s( e.g.heav yi ndust ry,busi nesspar k,
Ret ail Areas) .Themodel issui tablef ort hebi gandex pandi ngci ti
es.Thenumberof
nucl ei, aroundwhi cht heci tyex pands, dependsupont hesi t uat i
onal aswel las
histor ical f
act ors.Mul ti
plenucl eidev elopbecause: Cer t
ai ni ndust rialact ivities
requi ret ranspor tat ionf aci l
iti
ese. g.por ts, railwayst at ionset ct olowert ranspor t
ation
cost s.Cer tainact iviti
est endt ost ayapar te. g.r esident ial zoni ngandai r
por tset c.
Cer tainact iv itiesar ef oundt oget hert ot hei rmut ual adv ant agee. g.Uni ver sity,
bookst ore,cof feeshops, etc.
6.6.Assumpt i
onsThei nternal geogr aphyofci tiesowesmuchpecul iar i
tiesoft heir
i
ndi vidual sites.Wel l-
dr ainedandwoodedt er rainof tenf av orst hedev elopmentofa
high- classr esi dent ialar ea.Heav yi ndust rymaybeat tract edbyaf l
at ,il
l-drai ned
area, pr ov i
dedt hatsui tablet ranspor tf aci l
itiesar eav ailabl eandt hati ski ndof
i
ndust ryispr esenti napar ti
cul arci ty.
7.7.I tshowst hehi storyofi ndi v i
dual citiesandt hei rur bandev elopment .Landi s
FlatEv enDi st ribut ionofResour cesEv enDi stribut ionofpeopl ei nResi dent i
al
areasEv enTr anspor tationCost s
8.8.Cr iticismsNegl i
genceofhei ghtofbui ldings.Eachzonedi splay sasi gni ficant
degr eeofi nter nal het erogenei tyandnothomogenei ty.Unawar enessofi ner tia
forces.Noconsi der ationofi nf luenceofphy sical r
el i
efandgov er nmentpol icy .
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