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Basic Concepts of Microeconomics > Wealth

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Topics

  • Introduction
  • Characteristics
  • Real-Life Application
  • Key Point Summary
Maharashtra State Board: Class 11

Introduction

Wealth comprises anything that has market value and can be exchanged for money. Economists use specific criteria to classify an asset or commodity as “wealth”.

Maharashtra State Board: Class 11

Characteristics

  1. Utility – A commodity must fulfil human needs (e.g., food provides nourishment, a fridge preserves food).
  2. Scarcity – Items that are rare or limited (e.g., gold, water in a desert) are valuable and considered wealth.
  3. Transferability – Wealth can be transferred—sold, gifted, or inherited (e.g., automobiles, laptops).
  4. Externality – Only objects existing outside the human body that can be physically owned or exchanged (e.g., books, clothing).
Maharashtra State Board: Class 11

Real-Life Application

If a friend gives a gold ring to someone, the ring remains wealth because it is useful, limited, can be transferred, and is clearly external (not a body part). However, personal skills (like singing) or knowledge, though valuable, are not considered “wealth” in the economic sense, as they are not external or transferable commodities.

Maharashtra State Board: Class 11

Key Point Summary

  • Wealth includes only those items that are useful, scarce, transferable, and external to a person.
  • Not all valuable things (e.g., love, knowledge) count as wealth if lacking one or more criteria.
  • Real-world wealth: cars, jewellery, houses, land, and gadgets.

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