& VI Economics

What is
& Money
Students’ Manual
W h a t i s
E c o n o m i c s & M o n e y
Shiksha Kendra, 2, Community Centre, Preet Vihar, Delhi-110 092 India
What is
& Money
Students’ Manual
Shiksha Kendra, 2, Community Centre, Preet Vihar, Delhi-110 092 India
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This International Curriculum initiated by Central Board of Secondary Education - (CBSE) is a progressive step in making the
educational content and methodology more sensitive and responsive to the global needs. It signifies the emergence of a fresh
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this part or the core of the curriculum is to scaffold the learning experiences and to relate tacit knowledge with formal
knowledge. This would involve trans-disciplinary linkages that would form the core of the learning process. Perspectives,
SEWA (Social Empowerment through Work and Action), Life Skills and Research would be the constituents of this 'Core'. The
Core skills are the most significant aspects of a learner's holistic growth and learning curve.
The International Curriculum has been designed keeping in view the foundations of the National Curricular Framework (NCF
2005) NCERT and the experience gathered by the Board over the last seven decades in imparting effective learning to millions of
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exercise in providing the much needed Indian leadership for global education at the school level. The International Curriculum
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issues of empowerment with the help of the schools' administering this system strongly recommends that practicing teachers
become skillful learners on their own and also transfer their learning experiences to their peers through the interactive platforms
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I profusely thank Shri G. Balasubramanian, former Director (Academics), CBSE, Dr. Sadhana Parashar, Director (Training)
CBSE, Dr. Srijata Das, Education Officer CBSE, CBSE along with all the Officers involved in the development and
implementation of this material.
The CBSE-i website enables all stakeholders to participate in this initiative through the discussion forums provided on the
portal. Any further suggestions for modifying any part of this document are welcome.
Vineet Joshi
Chairman , CBSE
Shri Vineet Joshi, Chairman, CBSE
Dr. Sadhana Parashar, Director (Training), CBSE
Ideators VI-VIII
Ms. Aditi Mishra
Ms. Guneet Ohri
Ms. Sudha Ravi
Ms. Himani Asija
Ms. Neerada Suresh
Dr. Rajesh Hassija
Ms. Preeti Hans
Ms. Neelima Sharma
Ms. Gayatri Khanna
Ms. Urmila Guliani
Ms. Anuradha Joshi
Mrs. Sonali Sinha
Conceptual Framework
Shri G. Balasubramanian, Former Director (Acad), CBSE
Ms. Abha Adams, Consultant, Step by Step, School, Noida
Dr. Sadhana Parashar, Director (Training), CBSE
Ms. Charu Maini
Dr. Usha Sharma
Prof. Chand Kiran Saluja
Dr. Meena Dhani
Ms. Vijay Laxmi Raman
Mrs. Avanita Bir
Ms. Malini Sridhar
Ms. Leela Raghavan
Dr. Rashmi Sethi
Ms. Seema Rawat
Ms. Suman Nath Bhalla
Prof. Om Vikas
Material Production Groups: Classes VI-VIII
English :
Ms. Neha Sharma
Ms. Dipinder Kaur
Ms. Sarita Ahuja
Ms. Gayatri Khanna
Ms. Preeti Hans
Ms. Rachna Pandit
Ms. Renu Anand
Ms. Sheena Chhabra
Ms. Veena Bhasin
Ms. Trishya Mukherjee
Ms. Neerada Suresh
Ms. Sudha Ravi
Ms. Ratna Lal
Ms. Ritu Badia Vashisth
Ms. Vijay Laxmi Raman
Core - Research
Ms. Renu Anand
Ms. Gayatri Khanna
Dr. N K Sehgal
Ms. Anita Sharma
Ms. Rashmi Kathuria
Ms. Neha Sharma
Ms. Neeta Rastogi
Ms. Manjushtha Bose
Mathematics :
Dr. Ram Avtar
Mr. Mahendra Shankar
Ms. Poonam Kumar Mendiratta Ms. Deepa Gupta
Ms. Gayatri Chowhan
Ms. Rashmi Sharma
Ms. N Vidya
Ms. Kavita Kapoor
Ms. Divya Arora
Ms. Mamta Goyal
Ms. Chhavi Raheja
Physics :
Ms. Vidhu Narayanan
Ms. Meenambika Menon
Mr. Akshay Kumar Dixit
Ms. Patarlekha Sarkar
Ms. Veena Sharma
Ms. Neelam Malik
Ms. Nishi Dhanjal
Ms. Kiran Soni
Mr. Saroj Kumar
Ms. Rashmi Ramsinghaney
Ms. Vandna
Ms. Prerna Gosain
Ms. Nishtha Bharati
Ms. Seema Kapoor
Mr. Manish Panwar
Ms. Seema Bhandari
Ms. Vikram Yadav
Ms. Seema Chopra
Ms. Monika Chopra
Ms. Reema Arora
Ms. Jaspreet Kaur
Ms. Neha Sharma
Ms. Preeti Mittal
Ms. Shipra Sarcar
Ms. Leela Raghavan
Mr. Yogesh Kumar
Ms. Varsha Manku
Dr. K L Chopra
Ms. Nancy Sehgal
Ms. Purvi Srivastava
Ms. Babita Mahajan
Ms. Ritu Arora
Ms. Swati Panhani
Ms. Chanchal Chandna
Ms. Suparna Sharma
Ms. Aditi Babbar
History :
Ms. Leeza Dutta
Ms. Kalpana Pant
Ms. Ruchi Mahajan
Political Science:
Ms. Kanu Chopra
Ms. Shilpi Anand
Economics :
Ms. Leela Garewal
Ms. Anita Yadav
Ms. Madhuchhanda
Ms. Varsha Seth
Ms. Neha Sharma
Chief Co-ordinator : Dr. Srijata Das, EO
Ms. Sugandh Sharma, EO
Dr Rashmi Sethi, EO
Ms. S. Radha Mahalakshmi, E O Ms. Madhuchhanda, RO (Inn)
Mr. Navin Maini, RO (Tech) Shri Al Hilal Ahmed, AEO Shri R. P. Singh, AEO
Ms. Anjali Chhabra, AEO
Ms. Neelima Sharma,
Consultant (English)
Mr. Sanjay Sachdeva, SO
Sh. R. P. Sharma
Consultant (Science)
Ms. Reema Arora
Consultant (Chemistry)
What is Economics?
Its Meaning and Definition
Barter Economy
Its meaning, Need, working and Drawbacks
Money as a Medium of Exchange
Its need and use.
Skills/Learning Outcomes
Unit -1.
What is Economics?
What is
Economics in daily life
Comprehend the basic idea of
economics as a subject of study.
Appreciate the use of economics in
our daily lives.
Money as a medium of
To learn about barter economy as
Money as a
a first step for exchange of goods
Medium of
Barter Economy
between people.
Role of money in our day
Analyse the need of money as a
medium of exchange.
to day life.
Appreciate and value the role of
money in our day to day life.
Content no-1 to be taught in SA-I as an introductory chapter under “What is CONOMICS”
Content no-2, 3 should be taught in SA-II (Unit-2. Money as a Medium of Exchange)
Introduction to Economics: An Overview
Often enough we hear the following – „I need a new dress‟ or „I want to purchase a new car‟
or „I want a new watch‟ or „I want to see a film‟ or „I want to eat an ice cream‟.
All human beings have needs, wants and desires. They are unlimited in nature because as
soon as a need/want is met, another one comes up and this goes on endlessly.
As children we all read about Aladdin and his magic lamp. Whenever he wanted anything, he
just had to rub the lamp and a genie would appear and fulfill all his wants and desires. But, in
reality this is not the case. In real life we have to depend on our resources, i.e., our income
to fulfill our needs. Now, the question arises – can we fulfill all our needs?
Let us take the example of Jane who is very excited because she has got pocket money for
the first time. She has got $50 to spend in a month. But soon she realizes that she is in a
dilemma. There are so many things she wants but she will not be able to purchase all of them
as she has only $50 with her.
We can now answer our question. No, we cannot fulfill all our needs. Why?
Do we have unlimited resources?
No, we do not!
The resources available with us are limited.
Hence all our needs/wants cannot be fulfilled.
In our example, Jane has only $50/2500 Rs. to meet her needs and so she will not be able to
fulfill all her needs at a time.
Here we must also remember that not only that our resources limited, but also have
alternative uses. The money (income of a person) can be used to purchase all different type
of goods or services.
Faced with a situation of limited resources, what does Jane do? She has to make a choice and
choose to buy those things that she wants the most.
Oh dear! What to buy?
Now Jane is faced with a problem of choice!
Jane will spend her pocket money in such a way that she gets the maximum satisfaction out
of it.
Do You Know?
1. Adam Smith is known as the father of Economics.
2. James Mill and his son John Stuart Mill both were eminent economists
3. Amartya Sen: Indian Economist won Noble Prize for his contribution to Economics.
This problem of choice arose because of scarcity of resources. Had there been no scarcity,
i.e., had the money and resources available been unlimited, there would not have been any
problem of choice as all her wants would have been satisfied. But, in reality it is not possible.
Let us take another example. A farmer raises food crops. At any point of time, the input
resources used in agriculture like land, labour, water, seeds, fertilizer etc. are given. All
these resources also have alternate uses. The same resources can be used in the production of
fiber crops or beverage crops or vegetables. This gives rise to the problem of choice, as the
farmer has to decide how to use his resources so that he gets maximum satisfaction out of
their use.
Looking around us, in our daily lives, we will be able to see many examples of limited
(Scarcity), unlimited wants and problems of choice.
Story of Mohit
Mohit is a student of class Sixth (VI) in a Public school. His father is working in a Multi National
Company (MNC) and his mother is a business women. Mohit is good in academics and receives
a scholarship of Rupees 1000/ $20 every month. He tries to meet all his day-to-day expenses
with this money. He goes out for movies with his friends, he buys story books, chocolates, ice
creams etc form this money. He does not ask his parents for money for any such need of his. It
is now the month of March and Mohit is in a dilemma why? This month he needs to buy a gift
and a card for his best friend‟s birthday. He has seen a poster, which he likes, for his room.
He also wants to see some movies. His friends are also planning to go out for a picnic and want
him to accompany them.
Mohit has only Rupees 1000/ $ 20 to meet his needs and knows that he will not be able to get
all that he needs with this. He thinks and first buys a card and gift for his friend. He also puts
money aside for one film and the picnic. Now he has only Rupees 40/ 1$ left and he decides to
postpone the purchase of the poster and seeing the other film.
Read the case study above and answer the following:Why cannot Mohit fulfill all his needs?
The first thing he buys is the card and gift. Why?
Why does he postpone the purchase of the poster?
What is the basic problem faced by Master?
Do you think if he had saved more previously, he would have been in better position?
What is your opinion?
This is what economics is all about – making the best use of our limited resources!!!
We can agree with the following simple definition of economics:
“Economics is a study of how people and society choose to employ scarce resources that have
alternate uses, to satisfy their wants so that they can get maximum satisfaction”.
Economics can be discussed in three parts:
We want to know how the consumer decides what to buy (at the given prices) for his
use, given his income and its alternative uses.
We want to know how the producer decides what to produce for the market (when he
knows the costs and prices), given his resources.
A production unit
Garment factory
We want to know how the income arising out of the production of any good or service is
distributed among the people who made the production possible (the factors of
Money as a medium of exchange
Money, today, is a very important part of our lives. The goods and services required to satisfy
our needs can be obtained only with the help of money. A person who has money can easily
exchange it for any commodity or service that he wants.
Jane has got money with her and she wants to buy a chocolate. She goes to the shop, gives
the shopkeeper money and gets the chocolate. The chocolate seller needs to buy bread for
his family. He uses the money he earned from the sale of chocolates to buy the bread. The
baker needs to buy vegetables and uses the money earned by the sale of bread for it, and so
on. Money facilitates the process of exchange, i.e., it acts as the medium of exchange.
Can we imagine what the situation would be like if there was no money? How would we get
the things we need? The only option would be to exchange goods for goods. This was the
system which was followed in the ancient times (when there was no money) and was called
the Barter system of exchange.
A long time ago there were no coins. There was no such thing as money. Before the invention
of money people had to get their food, clothing and other needs by trading things. There is a
special name for this kind of trading called “Barter”. The word barter comes from a French
word, barter, which means "to trade." When you swap baseball cards with a friend or trade
your chocolate pudding for a cookie at lunchtime you are bartering because you are
exchanging something you have for something you want.
People traded some of the things they didn't need for things they wanted or needed. Even
then people had different jobs and skills. Some people were good hunters, some were better
farmers than others, some people made beautiful clay pots and some were skilled carpenters,
and so on. There were many different ways in which these people bartered, or traded, for
things they needed.
The good hunter might trade 10 rabbits to the carpenter for the carpenter's promise to fix his
roof. The farmer might trade a fat pig to the potter for pots to cook in. A goat might be
for some tools. Perhaps the shoemaker would trade a pair of shoes for sacks of grain
that his wife could make bread from.
Rahul and Amit were standing at the counter of the book shop waiting to pay for a book Amit
was buying.
Shopkeeper: That will be Rs 215.
Amit took out two crumpled 100 Re notes from his pocket.
Amit: That‟s all I have. Can you give it to me for Rs 200?
Shopkeeper: I am sorry but you will have to pay Rs 215.
Amit: Oh dear! I do not have any more money.
He dug into his pockets and took out a pen. Offering the pen to the shopkeeper he said, „I
have this pen that I purchased from you last week. Maybe you can take this‟.
Shopkeeper: Sorry son! We do not have the barter system anymore.
Rahul: What is barter?
Shopkeeper: You must go home and ask your grandfather. I am sure he will be able to tell
Rahul and Amit headed for Amit‟s home and found his grandfather sitting in the garden.
Amit: Grandpa, what is barter?
Grandpa: Oh barter! That used to happen very long ago when there was no money.
Rahul: No money! How did people manage without money?
Grandpa: They exchanged one good for another. This process of exchanging goods and
services directly is called barter.
Amit: Tell us more about it. What was it like?
Grandpa: I will tell you the story of farmer Jackson. He lived in the times when there was no
One year he had a very good harvest. He was very happy. Now he would be able to get a lot
of new things for the house. He gave five sacks of wheat in exchange of a cow. Wheat was
given to the cobbler and all members of the family got a new pair of shoes. Also the entire
roofing of the house was repaired and strengthened and the workers were given wheat in
exchange for their services rendered. The cobbler used the wheat for his family. He took a
pair of shoes to the cloth merchants‟ and exchanged them for cloth. The cloth merchant went
to farmer Jackson to get wheat and gave him cloth in exchange. The farmer‟s family was able
to get new clothes.
Rahul: It must have been difficult.
Grandpa: Well, I am sure it was. But since there was no money they all had to manage. The
farmer‟s wife baked bread and gave it to the woodcutter in exchange for firewood. You see
what they did not need they exchanged for what they needed. At times the exchange rate
became difficult. If one had a goat and wanted carrots and potatoes it was difficult to know
how many carrots he would be able to get in exchange for a goat.
Amit: That sounds so interesting.
Rahul: I think it‟s difficult. Thank God we have money.
Amit: I think barter would be good if you have things you do not need.
Grandpa: But, somebody has to want what you have and do not need.
Read the above case study and answer the following:What do you understand by barter?
What do you think was the main drawback of the barter exchange?
Do you feel barter can be followed today?
Most of the time, bartering was a good way of getting things.
But sometimes there were problems.
What happened when you had something to trade but nobody
wanted it?
What happened when the traders couldn't agree on what was
a fair trade?
People had to agree as to how many eggs would equal a sack of grain or how many fish
were enough to trade for a pot.
What if you had something to trade that almost everybody
Then it was easy to make a trade!
Do you Know?
Bartering was first recorded in Egypt over 4,500 years ago.
Source: http://www.lkfshow.com/funfacts/moneyecon.html
Moreover, the biggest problem in barter exchange is that both the trading partners would
need to have what the others want and both parties have to agree to buy and sell each
other‟s commodities. This is known as double coincidence of wants. To overcome all these
problems people began to use certain objects as a medium of exchange, i.e., money.
Both livestock, particularly cattle, and plant products such as grain, come to be used as
money in many different societies at different periods. Cattle are probably the oldest of all
forms of money, as domestication of animals tended to precede the cultivation of crops, and
were still used for that purpose in parts of Africa in the middle of the 20th century. But people
needed things that would last a long time, still be valuable, and could be carried around.
At about 1200 B.C. in China, cowry shells became the first medium of exchange, or money.
The cowry has served as money throughout history even to the middle of this century.
China, in 1,000 B.C., produced mock cowry shells at the end of the Stone Age. They can be
thought of as the original development of metal currency. In addition, tools made of metal,
like knives and spades, were also used in China as money. From these models, we developed
today's round coins that we use daily. The Chinese coins were usually made out of base metals
which had holes in them so that you could put the coins together to make a chain.
The first coins were known as cowry money - minted in China
At about 500 B.C., pieces of silver were the
earliest coins.
Eventually in time they took
the appearance of what we have today and
were imprinted with numerous gods and
emperors to mark their value. The first
country in the world to make metal coins was
called Lydia, sometime around 650 BC, in the
A 640 B C state coin from Lydia
western part of what is now Turkey.
The methods of making coins were used over and over again, and further improved upon by
the Greek, Persian, Macedonian, and Roman empires. Not like Chinese coins, which relied on
base metals, these new coins were composed from scarce metals such as bronze, gold, and
silver, which had a lot of intrinsic value.
Coins of the Roman Empire
First coins minted in America
Silver coins from the lifetime of Buddha
Coin of the Byzantine Empire
In 118 B.C., banknotes in the form of leather money were used in China. One-foot square
pieces of white deerskin edged in vivid colors were exchanged for goods. This is believed to
be the beginning of a kind of paper money. From the ninth century to the fifteenth century
A.D., in China, the first actual paper currency was used as money.
Today, modern money includes not only coins, paper money but also plastic money(credit
cards) which is widely used especially for transactions done on the internet.
Do you know?
In 1916, you could get your money laundered for free! If your money was in good enough
shape, you could take it to Washington, D.C., where it could be washed, ironed and reissued.
Do you know?
Do you know?
Parker Brothers printed more money for its There are only 5 currencies in the world that
Monopoly games than the Federal Reserve has have unique symbols to represent them.
issued in real money for the United States. If These are US Dollar, Yen, Pound, Euro and
you stacked up all the Monopoly sets made, Indian Rupee (latest addition). Of these only
the pile would be more than 1,100 miles high.
the pound sterling has its symbol printed on
the notes
Do you know?
Do You Know?
Paper money isn‟t made out of paper; it's The world‟s smallest coin weighed only .002
made out of cotton
grams and was from Nepal.
The world‟s heaviest coin was from Sweden
and weighed 43 pounds 7 1/4 oz.
Crossword puzzle
Activity of converting raw cotton into yarn and cotton textiles
Limited resource, unlimited wants
Deciding which book to buy out of how many
We use it to buy things
Final use of goods and services.
Round metallic object first used to buy goods
Research Based
Q 1.
What is “Token Money”? Find out.
Q 2.
What is Plastic Money. What is E. Money transaction?
Given below are the symbols of currencies of a few countries. Write the name of the
country next to its currency.
Euro money
Today, the countries of France, Germany, Italy, Greece, Finland and Spain use a
common currency called the „Euro‟.
Can you find out the orignal currencies of these countries?
Also, name all the countries which use the „Euro‟ and form part of the „Euro Zone‟.
Your class is going on a trip. Plan your expenses (you may want to spend on shopping,
Sight- seeing, food, gifts, etc.). Ask your parents for money accordingly. After the trip,
analyse why more money was spent on some things and less on others. Can you relate your
behavior to the definition of economics?
Expected Money exceptive
Actual money spent
Resources / Wed references
google images
Shiksha Kendra, 2, Community Centre, Preet Vihar, Delhi-110 092 India