Introduction to Microeconomics

• Economics is a social science concerned with the production, distribution, and consumption of goods and services.
• It studies how individuals, businesses, governments, and nations make choices about allocating resources to satisfy their wants and needs, attempting to determine how these groups should organize and coordinate efforts to achieve maximum output.

Microeconomics

• Microeconomics focuses on the behavior of individual economic agents, such as households, firms, and industries.
• It analyzes how these agents make decisions and how their interactions in markets determine prices and quantities.
• Supply and demand are fundamental concepts, where supply represents the quantity of a product that producers are willing to offer at various prices, and demand represents the quantity that consumers are willing to buy at those prices.
• Market equilibrium occurs where supply and demand intersect, determining the market price and quantity.
• Elasticity measures the responsiveness of one variable to a change in another. Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price.
• Market structures include perfect competition, monopoly, oligopoly, and monopolistic competition. These structures differ in terms of the number of firms, the degree of product differentiation, and the ease of entry and exit.
• Cost functions describe the relationship between the quantity of output a firm produces and the costs of production. Costs can be fixed or variable.
• Production functions describe the relationship between the quantity of inputs a firm uses and the quantity of output it produces.
• Externalities are costs or benefits that affect parties who are not directly involved in a transaction. They can be positive (e.g., education) or negative (e.g., pollution).
• Public goods are non-excludable (everyone can access them) and non-rivalrous (one person's consumption does not reduce availability for others).
• Information asymmetry occurs when one party in a transaction has more information than the other, leading to potential market inefficiencies.

Macroeconomics

• Macroeconomics examines the behavior of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
• Gross Domestic Product (GDP) is the total value of goods and services produced within a country's borders during a specific period.
• Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
• Unemployment refers to the percentage of the labor force that is without a job but actively seeking employment.
• Fiscal policy involves the use of government spending and taxation to influence the economy.
• Monetary policy involves the actions of a central bank to manipulate the money supply and credit conditions to stimulate or restrain economic activity.
• Economic growth refers to the increase in the production of goods and services in an economy over time.
• Business cycles are the periodic but irregular fluctuations in economic activity, measured by GDP and other macroeconomic variables.
• Aggregate supply is the total supply of goods and services that firms in a national economy plan on selling during a specific time period at a given price level.
• Aggregate demand is the total demand for goods and services in an economy at a given price level.
• Exchange rates determine the value of one currency in terms of another, affecting international trade and investment.

Economic Systems

• Capitalism is an economic system where the means of production are privately owned and operated for profit.
• Socialism is an economic system where the means of production are owned or controlled by the public or the government.
• Communism is a theoretical economic and political system where the means of production are owned communally and there is no private property or social classes.
• Mixed economies combine elements of capitalism and socialism, with both private and public sectors playing significant roles.

Economic Development

• Economic development refers to the process of improving the economic well-being and quality of life for a country's population.
• Factors influencing economic development include human capital, natural resources, technology, and institutions.
• Trade policies, such as tariffs and free trade agreements, can have significant impacts on a country's economic development.
• Foreign direct investment (FDI) involves investment made by a company or entity based in one country, into a business or entity based in another country.
• Sustainable development aims to meet the needs of the present without compromising the ability of future generations to meet their own needs.

International Economics

• International trade involves the exchange of goods and services between countries.
• Comparative advantage is the ability of a country to produce a good or service at a lower opportunity cost than another country.
• Exchange rates determine the value of one currency in terms of another, affecting international trade and investment.
• Balance of payments is a record of all economic transactions between a country and the rest of the world.
• Trade barriers, such as tariffs and quotas, restrict international trade and can have both positive and negative effects.
• Globalization is the increasing integration of economies around the world, particularly through trade, financial flows, and foreign direct investment.

Economic Indicators

• Economic indicators are statistics that provide information about the current condition of the economy and can be used to forecast future economic activity.
• Leading indicators tend to change before the economy as a whole changes, such as new orders for durable goods.
• Coincident indicators change at the same time as the economy, such as employment levels.
• Lagging indicators change after the economy has already begun to follow a particular pattern or trend, such as the unemployment rate.
• Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.
• Producer Price Index (PPI) measures the average change over time in the selling prices received by domestic producers for their output.