Introduction to Economics Basics Quiz

Introduction to Economics in 11th Standard HSC

In understanding economics, it is crucial to lay down simple concepts that will serve as a foundation upon which you can build more complex theories. In this section, we'll look into some of these foundations:

What Is Economics?

Economics: It deals with how people manage their limited resources to satisfy their unlimited wants and needs. This discipline examines the production, distribution, and consumption of goods and services within societies. Economists employ mathematics, statistics, politics, sociology, psychology, ethics, philosophy, history, geography, demographics, law, and other disciplines to explain various economic phenomena. Essentially, economics is the study of human behavior relating to the allocation of scarce resources among competing ends over time.

Understanding Supply and Demand

The dynamics between supply and demand play a pivotal role in setting prices. When there's less supply relative to demand, prices increase; when there's more supply than demanded, prices decrease. However, in real life, prices don't always move directly upwards with increased scarcity or fall sharply due to oversupply. Prices may remain constant despite changes in either supply or demand if they're offsetting each other equally. For example, if a farmer expects lower harvests next year due to unfavorable weather conditions, he might reduce his selling price today so that he doesn't lose too much profit from reduced future supplies. Here lies one key difference between everyday observations and economic theory – it's often assumed that individuals act rationally given information available at any point in time.