Introduction to Economics PDF

Introduction to Economics Dr. Ghulam Ghouse Associate Professor Department of Economics  The Great Depression (1929-1939) Cause: Stock market crash, bank failures, reduction in consumer spending. Impact: Global economic downturn, mass unemployment, deflation, widespread poverty, the...

Introduction to Economics Dr. Ghulam Ghouse Associate Professor Department of Economics  The Great Depression (1929-1939) Cause: Stock market crash, bank failures, reduction in consumer spending. Impact: Global economic downturn, mass unemployment, deflation, widespread poverty, the collapse of international trade.  The 1970s Oil Crisis (1973-1974) Cause: OPEC oil restrictions against Western countries. Impact: Increase rapidly in oil prices, stagflation (high inflation combined with unemployment and stagnant demand), and economic recessions in many countries.  The Asian Financial Crisis (1997-1998) Cause: Over-speculation in financial markets, collapse of currencies, high levels of foreign debt. Impact: Severe currency devaluation in Southeast Asia, collapse of financial markets, and recession in affected countries (Thailand, Indonesia, South Korea, Malaysia).  The Russian Financial Crisis (1998) Cause: Drop in oil prices, excessive foreign debt, inability to control inflation. Impact: Russian government default, sharp devaluation of the ruble, collapse of the domestic banking system.  The Argentine Economic Crisis (1998- 2002) Cause: Currency devalue against the US dollar, government debt, economic mismanagement. Impact: Hyperinflation, widespread poverty, default on debt, collapse of banking system.  The Dot-com Bubble (1999-2001) Cause: Overvaluation of tech companies, speculative investments in internet startups. Impact: Stock market crash, significant loss of wealth, bankruptcy of many dot-com companies.  The Global Financial Crisis (2007-2008) Cause: Subprime loan crisis, excessive risk-taking by banks, the collapse of Lehman Brothers. Impact: Global recession, massive job losses, government bailouts, collapse of housing markets, tightening of credit markets.  The European Debt Crisis (2010-2012) Cause: Excessive government debt in Eurozone countries (Greece, Portugal, Ireland, Spain, Italy), mismanagement of fiscal policies. Impact: Bailouts from the European Union and IMF, austerity measures, political instability, unemployment spikes, weakening of the Euro.  The Greek Debt Crisis (2009-2018) Cause: High government spending, tax dodging, large public debt. Impact: Severe austerity measures, bailouts from the EU and IMF, public protests, prolonged recession.  The COVID-19 Economic Crisis (2020-2021) Cause: Global pandemic, lockdowns, disruption of global supply chains, decline in consumer demand. Impact: Global recession, mass unemployment, business endings, economic motivation packages, rise in government debt.  Sri Lankan Economic Crisis (2022) Cause: Foreign exchange crisis, Foreign Debt default, Inflation, and Political crisis. Impact: Food shortages, power cuts, fuel shortages, widespread protests, and mass migration.  Pakistan’s Economic Crisis (2022-Present) Cause: High Public Debt, Foreign exchange crisis, Inflation, and Political crisis. Impact: Currency devaluation, inflation, rising cost of imports, loss of purchasing power. Only One Reason Economic (Mismanagements)  What is Economics? Simply: Economics is HOW to fulfill UNLIMITED DESIRES with LIMITED RESOURCES. Economics is the study of the nature and causes of the wealth of nations (Adam Smith, 1776). Economics is the study of how society manages its scarce resources. (Gregory Mankiw, 2020).  Scarcity Scarcity means that human wants for goods, services, and resources exceed what is available resources. Scarcity of Resources People experiencing homelessness are a stark reminder that scarcity of resources is real. (Credit: "Pittsburgh Homeless" by "daveyinn"/Flickr Creative Commons, CC BY 2.0.  Economics and Human Behavior Economics is not just about models and relationships. It is also about understanding the complexities of human behavior, especially when rational assumptions fail. Learning rational biases helps predict real-world behavior, whether rational or not. Major Divisions of Economics Microeconomics: Focuses on the behavior and decisions of individual units, such as consumers, firms, and industries. Macroeconomics: Study the economy as a whole, analyzing aggregate indicators like national income, unemployment rates, and inflation.  Most Powerful Force Invisible Hand: How self-interested individuals in a free market can unintentionally benefit society as a whole. Work through prices  Demand and Wish The willingness and ability of consumers to purchase a good or service at a specific price and within a specific time period. Willingness Ability Specific price Availability of good If violate any of above condition then it will be wish…  Law of Demand The relationship between the price of a good and the quantity demanded of good  Supply The total amount of a specific good or service that is available to consumers at specific price and at specific time. Availability of good Specific Price  Law of Supply The relationship between the price of a good or service and the quantity supplied by producers.  Market Equilibrium When the supply and demand for a product or service are equal, resulting in a stable price.  Law of Diminishing Marginal Utility Utility: The value or usefulness of a good or service to a consumer. Diminishing Marginal Utility: The satisfaction or utility derived from a good or service decreases as the quantity consumed increases.  Opportunity Cost The opportunity cost is the value the company forgoes when choosing one option over another.  Major Branches Development Economics International Trade Monetary Economics Mathematical Economics Financial Economics Environmental Economics Issues in Pakistan Economy Institutional Economics Public Economics Statistical Method in Economics Econometrics  Development Economics A branch of economics that studies the economic aspects of development.  International Trade The study of the exchange of goods and services between countries  Monetary Economics A branch of economics that studies money and its role in society, including how it functions, is regulated, and is traded between systems  Mathematical Economics A branch of economics that use mathematical methods to study economic theories and problems.  Financial Economics A branch of economics that analyzes the use and distribution of financial resources in markets.  Environmental Economics A branch of economics that studies the economic impact of environmental policies.  Issues in Pakistan Economy A branch of economics that studies the economic issues and their impacts on Pakistan Economy.  Institutional Economics A branch of economics that studies how institutions impact the behavior and capabilities of economic actors.  Public Economics A branch of economics that studies the government policy through the lens of economic efficiency and equity  Statistical Economics The study of economic data through the collection, processing, and analysis of numerical information  Econometrics The study to analyze the stochastic relationships between economic variables. Thank You