Basic unit of economic system are
- Household :- household refer to the inmate of a house collectively this is the most simple but the most important unit of a system. All economic activity are directed toward the ultimate objective of satisfaction of household wants. just as economy is confronted with the problem of multiplicity of and and scarcity of means similarly a household is also confronted with the problem of scarcity of means and multiplicity of want a household has to involve itself in choice making and decision making for example household has to decide whether to spend more or education or on acquiring more on consumer durable similarly household has to decide as to how much money income should be consumed and how much saved.
- Role of Household :-Household has to perform dual function in an economy as supply of the factor services they offer services in the form of labour landlord enterprenuer etc to the farm on the other hand as consumer the house on something all the good and services produced in.
- Objective of a Household:- The ultimate object of a household is to maximize satisfaction if we take the example of an individual he want to maximize the satisfaction out of his money income how has to make choice between the less urgent and more urgent want a household would like to spend his money income of different commodity in such a manner AD to drive maximum satisfaction out of it a household is always motivated by self-interest rather than communal interest.
- Firm:- A firm refer of that unit of an economy which perform activities relating to production of goods and services waterhouse old is to the theory of demand of form is to Theory of supply and analyse of production of firm is generally identified with an entrepreneur entrepreneur has declared decision about the location of plant disease qualities of a commodity to be produced nature and combination of effective to be employed price fixation management sales promotion etc.
