Economics: Introduction to Economics Concepts

1\. Introduction to Economics Definition of Economics \- Economics: The study of how individuals and societies allocate scarce resources to satisfy unlimited wants. Key Concepts \- Scarcity: Resources are limited; wants are unlimited. \- Example: There is a finite amount of oil, but consumers...

1\. Introduction to Economics Definition of Economics \- Economics: The study of how individuals and societies allocate scarce resources to satisfy unlimited wants. Key Concepts \- Scarcity: Resources are limited; wants are unlimited. \- Example: There is a finite amount of oil, but consumers have a constant desire for fuel. \- Choice: Scarcity necessitates choices; making choices involves trade-offs. \- Opportunity Cost: The value of the next best alternative foregone. \- Example: If you spend money on a new phone, the opportunity cost is what you could have purchased with that money. 2\. The Economic Problem Factors of Production \- Land: Natural resources used to produce goods (e.g., minerals, forests). \- Labor: Human effort in production (e.g., workers in a factory). -Capital: Tools and machinery used in production (e.g., computers, factories). \- Entrepreneurship: The ability to combine resources and take risks to create new products or services. Production Possibility Curve (PPC) \- Definition: A graph that shows the maximum combinations of goods that can be produced with available resources. \- Example: If an economy can produce only cars and computers, the PPC shows the trade-offs between producing one versus the other. \- Shifts in the PPC: Economic growth (outward shift) can occur due to improved technology or an increase in resources. 3\. Demand and Supply Law of Demand \- Definition: As the price of a good decreases, the quantity demanded increases, and vice versa. \- Demand Curve \- Visual Representation: A downward sloping curve showing the relationship between price and quantity demanded. Law of Supply \- Definition: As the price of a good increases, the quantity supplied increases, and vice Supply Curve \- Visual Representation: An upward sloping curve showing the relationship between price and quantity supplied. Market Equilibrium \- Definition: The point where the quantity demanded equals the quantity supplied. Shifts in Demand and Supply \- Factors Affecting Demand: Income, tastes, prices of related goods (substitutes and complements), and expectations. \- \- Factors Affecting Supply: Production costs, technology, number of suppliers, and expectations. 4\. Market Structures a\) Perfect Competition \- Characteristics: Many firms, homogeneous products, price takers. -b) Monopolistic Competition \- Characteristics: Many firms, differentiated products, some control over price. -c) Oligopoly \- Characteristics: Few firms, interdependent pricing, potential for collusion. \- Example: Airline companies. d\) Monopoly \- Characteristics: Single firm, significant price-setting power, barriers to entry.