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What is meant by wealth in economics?

Wealth:

In economic sense, any good or service that has value in exchange is called wealth. This means that any good and service that has the three characteristics of value i.e. utility, scarcity and transferability is wealth. For example, TV, radio, pencil, pen etc, are all wealth in the sense that they have values is exchange.

A product is said to be wealth if it has the following three characteristics.

i) Utility:

The product must have the power to satisfy a want as bread, clothes, pen, pencil etc, can satisfy human wants.

ii) Scarcity:

The supply of a product must be less than its aggregate demand. In other words, it must be purchased at a non-zero price, thus, free goods do not have value from the economic point of view.

iii) Transferability:

The product could be transferred from one place to another or it must at least be transferable through the transfer of ownership. For example, a piece of land can be transferred by the transfer of ownership.

There is always a price for wealth in the market. Therefore, free goods like, air, Sun, rain etc. are not wealth. Likewise, intelligence, competence and artistic qualities are not wealth because these things cannot be sold in the market at a price as they cannot be transferred from one person to another.

Categories of Wealth:

Wealth can be divided into three categories.

i) Individual Wealth:

Material and non-material goods owned by an individual is his individual wealth. For example, material goods like, land, clothes, jewelry and non-material goods like trade mark of a firm or a product and status of a person are all individual wealth.

ii) National Wealth:

Goods owned by a nation are national wealth. For example, roads, forests, rivers, mountains etc, are national wealth.

iii) International Wealth:

Goods which are used by the people of the whole world e.g. space, sea autobiography of the great people etc, are international wealth.

Importance of Wealth:

Economics is a science of wealth in which we study production, exchange, distribution and consumption of wealth. This shows that economic activities of all people living in a country are derived to the acquisition of wealth, European countries are developed countries and are, therefore, enjoying a very high standard of living.

This is due to the fact that they have accumulated a large amount of wealth. Afro-Asian countries are poor and their standard of living is very low. This is because of the fact that they have much less amount of wealth than their requirements. Thus, it is the wealth that distinguishes developed countries from that underdeveloped countries.

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