Economics Basics

Study Notes

Microeconomics

Markets and Market Failure

Market Structure:
- Perfect Competition: many firms, free entry/exit, homogeneous product
- Monopoly: single firm, barriers to entry, price maker
- Monopolistic Competition: many firms, product differentiation, non-price competition
- Oligopoly: few firms, interdependent decision-making
Market Failure:
- Externalities: positive (e.g., education) or negative (e.g., pollution) effects on third parties
- Public Goods: non-rivalrous, non-excludable (e.g., national defense)
- Information Failure: asymmetric information between buyers and sellers

Consumer Behaviour

Demand:
- Law of Demand: as price increases, quantity demanded decreases
- Determinants of Demand: price, income, prices of related goods, tastes and preferences
Consumer Equilibrium:
- Budget Constraint: graphical representation of consumption possibilities
- Indifference Curve Analysis: marginal rate of substitution, diminishing marginal utility

Production and Costs

Production:
- Law of Variable Proportions: diminishing marginal product
- Returns to Scale: increasing, decreasing, or constant returns
Costs:
- Fixed and Variable Costs: total, average, and marginal costs
- Opportunity Cost: next best alternative forgone

Macroeconomics

National Income and Expenditure

National Income:
- Gross Domestic Product (GDP): market value of goods and services
- Net Domestic Product (NDP): GDP - depreciation
Expenditure Approach:
- Aggregate Demand: consumption, investment, government spending, net exports
- Leakages (Savings, Taxes, Imports) and Injections (Investment, Government Spending, Exports)

Economic Growth and Development

Economic Growth:
- Increases in productive capacity, technological progress, and institutional factors
- Measured by percentage change in GDP or GDP per capita
Economic Development:
- Improvement in living standards, health, education, and income distribution
- Human Development Index (HDI): life expectancy, education, income

Fiscal Policy and the National Economy

Fiscal Policy:
- Government Spending and Taxation: expansionary (stimulus) or contractionary (austerity)
- Automatic Stabilizers: unemployment benefits, progressive taxation
Monetary Policy:
- Central Banks: setting interest rates, open market operations
- Money Supply and Demand: liquidity, velocity of money

Description

Test your understanding of fundamental economics concepts, including markets, consumer behavior, production, and macroeconomics. Explore topics such as market structure, demand, and national income. Assess your knowledge of economic growth, fiscal policy, and more.