Key Concepts in Economics

Economics: The study of how individuals, businesses, and governments allocate scarce resources.
Scarcity: Limited availability of resources relative to the unlimited wants of individuals.

Microeconomics:
- Focuses on individual consumers and businesses.
- Analyzes supply and demand, pricing, and consumer behavior.
Macroeconomics:
- Studies the economy as a whole.
- Examines aggregate indicators such as GDP, unemployment rates, and inflation.

Supply and Demand:
- Supply: The quantity of a good or service that producers are willing to sell at different prices.
- Demand: The quantity of a good or service that consumers are willing to purchase at different prices.
- Market Equilibrium: The point where supply equals demand.
Opportunity Cost:
- The cost of forgoing the next best alternative when making a decision.
Marginal Analysis:
- Comparing the additional benefits of an action to the additional costs incurred.

Capitalism:
- Private ownership of resources and market-driven economy.
Socialism:
- Collective or governmental ownership of resources and central planning.
Mixed Economy:
- Combines elements of both capitalism and socialism.

Gross Domestic Product (GDP):
- The total value of all goods and services produced in a country over a specific time period.
Inflation:
- The rate at which the general level of prices for goods and services rises, eroding purchasing power.
Unemployment Rate:
- The percentage of the labor force that is jobless and actively seeking employment.

Perfect Competition:
- Many buyers and sellers, homogeneous products, and free entry and exit.
Monopoly:
- A single seller dominates the market with no close substitutes.
Oligopoly:
- A few firms dominate the market, often leading to collusion.
Monopolistic Competition:
- Many firms sell products that are similar but not identical.

Fiscal Policy:
- Government spending and tax policies used to influence economic conditions.
Monetary Policy:
- Central bank actions to control the money supply and interest rates to influence the economy.

Trade:
- The exchange of goods and services between countries.
Exchange Rates:
- The value of one currency in relation to another.
Balance of Payments:
- A record of all economic transactions between residents of a country and the rest of the world.

Classical Economics:
- Belief in free markets and that economies are self-regulating.
Keynesian Economics:
- Advocates for active government intervention to manage economic cycles.
Supply-Side Economics:
- Emphasizes tax cuts and deregulation to stimulate production.

Adam Smith:
- Known as the father of modern economics; introduced concepts like the "invisible hand."
John Maynard Keynes:
- Pioneered macroeconomic theory and advocated government intervention during recessions.
Milton Friedman:
- Promoted monetarism and the importance of controlling money supply.

These notes encapsulate fundamental aspects of economics, providing a structured overview of the subject.

Economics examines the allocation of scarce resources among competing wants by individuals, businesses, and governments.
Scarcity refers to the limited availability of resources compared to infinite human desires.

Microeconomics analyzes the behavior of individuals and businesses, focusing on supply and demand, pricing strategies, and consumer choices.
Macroeconomics looks at the economy as a unified system, emphasizing aggregate metrics such as Gross Domestic Product (GDP), unemployment rates, and inflation.

Supply indicates how much of a good or service producers are willing to offer at varying prices, while demand reflects consumers' willingness to purchase at those prices.
Market equilibrium is achieved when supply meets demand.
Opportunity cost is the trade-off representing the next best alternative given up when a choice is made.
Marginal analysis involves assessing the additional benefits against the additional costs of an action to determine its viability.

Capitalism is characterized by private ownership of resources and a market-driven approach to economic decision-making.
Socialism involves collective or government ownership of resources with centralized planning to distribute resources.
A mixed economy incorporates aspects of both capitalism and socialism, balancing private enterprise with public control.

GDP gauges the total monetary value of all goods and services produced within a country during a specified timeframe.
Inflation measures the increase in general price levels for goods and services, effectively decreasing the purchasing power of currency.
The unemployment rate expresses the proportion of the labor force that is without jobs while actively seeking employment.

Perfect competition features numerous buyers and sellers, homogeneous products, and unrestricted market entry and exit.
A monopoly is characterized by one seller controlling the market with no close substitutes available.
Oligopoly consists of a few firms dominating the market, potentially leading to collusion among competitors.
Monopolistic competition involves many firms selling similar but differentiated products.

Fiscal policy encompasses government spending and taxation strategies aimed at influencing economic dynamics.
Monetary policy pertains to central bank measures that adjust the money supply and interest rates to stabilize or stimulate the economy.

Trade involves the interchange of goods and services between nations, expanding market opportunities beyond domestic borders.
Exchange rates represent the value of one currency in comparison to another, affecting international trade dynamics.
The balance of payments records all economic transactions between residents of a nation and the global economy.

Classical economics champions the idea that free markets regulate themselves without outside interference.
Keynesian economics recommends governmental engagement to moderate economic fluctuations during recessions.
Supply-side economics advocates for tax reductions and deregulation to enhance production and economic growth.

Adam Smith is revered as the father of modern economics, credited with the concept of the "invisible hand" guiding market self-regulation.
John Maynard Keynes significantly influenced macroeconomic theory and endorsed government action to mitigate economic downturns.
Milton Friedman highlighted the relevance of controlling the money supply through his advocacy of monetarism, emphasizing monetary policy's role in economic health.