Introduction to Economics Concepts

Economics is the study of how individuals, businesses, and governments allocate scarce resources to meet their needs and desires.
It examines choices made in the context of limited resources and unlimited wants.

Scarcity
- Limited availability of resources versus unlimited human wants.
- Forces trade-offs and decision-making.
Supply and Demand
- Supply: Quantity of goods/services producers are willing to sell at different prices.
- Demand: Quantity of goods/services consumers are willing to buy at different prices.
- Equilibrium is reached where supply equals demand.
Opportunity Cost
- The cost of forgoing the next best alternative when making a decision.
- Important for understanding trade-offs.
Economic Systems
- Market Economy: Decisions made through supply and demand.
- Command Economy: Central authority makes decisions (e.g., socialism).
- Mixed Economy: Combines elements of both market and command systems.
Microeconomics vs. Macroeconomics
- Microeconomics: Focuses on individual consumers and businesses, pricing, and how they interact in markets.
- Macroeconomics: Examines overall economy, including inflation, unemployment, and national income.

Classical Economics: Advocates for free markets and limited government intervention.
Keynesian Economics: Emphasizes the role of government in managing economic fluctuations through fiscal policy.
Monetarism: Focuses on the role of governments in controlling the amount of money in circulation.

Perfect Competition
- Many buyers and sellers, homogeneous products, easy entry and exit.
Monopoly
- Single seller dominates the market, unique product, significant barriers to entry.
Oligopoly
- Few sellers control the market, products may be similar or differentiated.
Monopolistic Competition
- Many firms compete with differentiated products, some price-setting power.

Gross Domestic Product (GDP): Total value of goods and services produced in a country.
Unemployment Rate: Percentage of the labor force that is jobless and seeking employment.
Inflation Rate: Measure of the rate at which the general level of prices for goods and services rises.

Fiscal Policy: Government spending and tax policies used to influence the economy.
Monetary Policy: Central bank actions that manage the money supply and interest rates to achieve macroeconomic objectives like controlling inflation.

Trade: Exchange of goods and services between countries.
Exchange Rates: The value of one currency for the purpose of conversion to another.
Balance of Payments: Record of all economic transactions between residents of a country and the rest of the world.

Scarcity
- Limited resources compared to unlimited demands.
- Necessitates trade-offs in decision-making.
Supply and Demand
- Supply: Willingness of producers to sell goods/services at various prices.
- Demand: Willingness of consumers to purchase goods/services at different prices.
- Equilibrium is established when supply meets demand.
Opportunity Cost
- Represents the value of the best alternative given up when making a choice.
- Crucial for evaluating trade-offs in economics.
Economic Systems
- Market Economy: Decisions guided by supply and demand forces.
- Command Economy: Central authority dictates economic decisions (e.g., socialism).
- Mixed Economy: Integrates features of both market and command systems.
Microeconomics vs. Macroeconomics
- Microeconomics: Analyzes individual and business interactions, pricing, and market functions.
- Macroeconomics: Studies large-scale economies, encompassing inflation, unemployment, and national income.

Classical Economics
- Advocates minimal government interference and prioritization of free markets.
Keynesian Economics
- Stresses government intervention through fiscal policy to stabilize economic fluctuations.
Monetarism
- Concentrates on managing money supply as a tool for economic influence.

Perfect Competition
- Characterized by numerous buyers and sellers, similar products, and ease of entry/exit.
Monopoly
- A sole seller dominates the market with a unique product and significant entry barriers.
Oligopoly
- A market controlled by a few sellers, with either similar or varied products.
Monopolistic Competition
- Many firms competing with products that are differentiated, allowing some price-setting power.

Gross Domestic Product (GDP)
- Total market value of all goods and services produced within a country.
Unemployment Rate
- Percentage of the labor force that is not employed but actively seeking work.
Inflation Rate
- Rate indicating how quickly the general price level for goods and services rises.

Fiscal Policy
- Government strategies involving spending and taxation to influence economic conditions.
Monetary Policy
- Actions by the central bank aimed at regulating money supply and interest rates for macroeconomic stability.

Trade
- Involves the exchange of goods and services between nations.
Exchange Rates
- Reflects the value of one currency relative to another, affecting trade dynamics.
Balance of Payments
- Comprehensive record of all economic transactions between a country's residents and the global economy.