Introduction to Microeconomics

• Economics is a social science focused on the production, distribution, and consumption of goods and services.
• It involves analyzing choices made by individuals, businesses, governments, and societies in allocating resources to meet needs and wants.

Microeconomics

• Microeconomics studies the behavior of individual economic players like households, firms, and markets.
• It examines decision-making in conditions of scarcity and how these decisions shape prices and quantities in specific markets.
• Supply and demand are core concepts; demand reflects consumers' desire and ability to buy at different prices, while supply represents producers' willingness to offer goods/services at various prices.
• Market equilibrium is where supply and demand curves meet, dictating the market price and quantity.
• Elasticity measures how much quantity demanded or supplied changes in response to shifts in price, income, or other variables.
• Different market structures exist, including perfect competition, monopoly, oligopoly, and monopolistic competition, each with unique levels of competition and market influence.
• Production theory explores how firms combine inputs (labor, capital, materials) to generate outputs, emphasizing production functions, costs, and efficiency.
• Cost curves illustrate the link between a firm's costs and its output, including fixed, variable, total, average, and marginal costs.
• Game theory analyzes strategic interactions between agents, with key concepts like Nash equilibrium and the prisoner's dilemma.

Macroeconomics

• Macroeconomics examines the economy-wide behavior, focusing on GDP, inflation, unemployment, and economic growth.
• GDP (Gross Domestic Product) quantifies the total value of goods and services produced within a country during a period, calculated via expenditure, income, or production approaches.
• Inflation is a sustained increase in the general price level, often gauged by the Consumer Price Index (CPI) or the GDP deflator.
• Unemployment signifies individuals seeking work but unable to find it, typically measured by the unemployment rate.
• Economic growth reflects the increase in goods and services production over time, typically measured by the growth rate of real GDP.
• Fiscal policy utilizes government spending and taxation to impact aggregate demand and economic activity.
• Monetary policy involves central bank actions to adjust the money supply and credit conditions, thereby influencing interest rates and inflation.
• Business cycles are recurring patterns of expansion and contraction in economic activity, featuring growth (expansions) and decline (recessions).
• International trade studies the exchange of goods and services between countries, analyzing trade patterns based on comparative advantage and trade barriers.
• Exchange rates determine currency values relative to each other, affecting international trade and investment.

Economic Systems

• An economic system details how a society organizes the production, distribution, and consumption of goods and services.
• Capitalism is characterized by private ownership, free markets, and profit seeking.
• Socialism emphasizes social ownership or control of production means to enhance social welfare and equality.
• Communism envisions a classless society with collective resource ownership.
• Mixed economies blend capitalism and socialism, with government intervention to correct market failures and advance social objectives.

Economic Indicators

• Economic indicators are statistics that offer insights into the economy's condition and help predict future activity.
• Leading indicators tend to precede economic changes, signaling future trends.
• Lagging indicators confirm past economic trends, changing after the economy has shifted.
• Coincident indicators align with the economy's current state, reflecting ongoing activity.
• Examples include GDP growth rate, inflation rate, unemployment rate, consumer confidence index, and business investment.