Introduction To Economics

Economics is a social science that studies how people use their limited resources to satisfy their unlimited needs and wants. It examines how people make choices and trade-offs when they face scarcity

……………….introduction to economics……………….

Branches Of Economy

1. Macro Economics
2. Micro Economics

Macro Economics

1. study of combination of society
2. deals with aggregate, level, income, employment.
3. Use aggregate demands and aggregate supply curve to analyse economic fluctuations and effect of policies

Micro Economics

1. study of indivudual like banks, households etc….
2. Specific markets , products, outcomes, incomes.
3. Supply curves to analyse market,and effect of policies

Introduction To Economics— Factors Of Production

-Factors of production are the resources needed to proudce and deliver goods in the economy

1. Land
2. Labour
3. Capital
4. Enterprenur

Types Of Economies

Captalism

features

1. private occupies more property than public
2. It has limeted government intervention
3. In captalism the people has economic freedom
4. captalism has profit incentive

Merits

1. Optimal allocation of resources
2. Market efficiency-price mechanism
3. economic growth higher in the captalism
4. captalism has consumer sovereginity
5. innovation and technology develops in this economy

Issues

1. wealth accumulation
2. production of negative externalities like pollution,deforestation.
3. income disparity
4. economic division and fluctuations…….

Socialism

1. public ownership of resources and means of production.
2. government control of economic planning and decision making.
3. social welfare as the main goal
4. no competition among producers or consumers.

Merits

1. decrease in social and economic disparities.
2. distribution of resources according to the needs.
3. provision of public services and benefits.

Issues

1. exclusive rules and regulations that cause inefficiency and waste.
2. lack of motivation and innovation due to equal rewards.
3. restricted options and preferences for consumers and produces.

Mixed Economy

Features
⚬ Both public and private sectors own and operate the resources and means of production
⚬ Economic problems are solved by a combination of market forces and government intervention
⚬ Private sector has some economic freedom but is regulated by the government

• Merits
  ⚬ Economic growth is achieved by the efficiency of the private sector and the stability of the public sector
  ⚬ Balanced growth is ensured by the government’s role in providing public goods and reducing regional
  disparities
  ⚬ Resources are used optimally by the market mechanism and the government’s planning
  ⚬ Government protects the interests of all sections of society by promoting social justice and welfare
• Demerits
  ⚬ Public sector suffers from inefficiency, corruption, and bureaucracy
  ⚬ Private sector fears nationalization or excessive regulation by the government
  ⚬ Income inequality persists due to the gap between the rich and the poor

Opportunity Cost (OC)

• Another name for alternative cost.
• The value of the best option that you give up when you
  make a choice.
• You have unlimited desires but limited resources, so you
  have to make trade-offs.
• Opportunity cost is the trade-off you face when you choose
  one option over another.
  OC = Benefit of best option-Benifit of chosen option

Oppportunity Cost

Option 1(100)	Option 2(100)
invest in fixed deposit, interest rate=6%	start a business

Supply and Demand Curve
Movement along the curve – occurs when only the price of the good or service changes.
We use ‘contraction/expansion’ to describe the change in quantity demanded or supplied.

• Shift of curve – occurs when any other factor affecting demand or supply changes,
  except for the price of the good or service. For example, for the demand curve, some
  factors that can cause a shift are:
  ⚬ Income of consumers
  ⚬ Price of substitutes or complements
  ⚬ Preferences of consumers We use ‘increase/decrease’ to describe the change in
  demand or supply.