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Basic Economics Notes

Economics is the study of resource allocation to meet unlimited wants, divided into microeconomics and macroeconomics. Key concepts include scarcity, opportunity cost, supply and demand, and economic indicators like GDP and unemployment rate. Economic systems vary from market to command economies, with policies influencing fiscal and monetary aspects, while common issues include poverty and market failures.

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41 views2 pages

Basic Economics Notes

Economics is the study of resource allocation to meet unlimited wants, divided into microeconomics and macroeconomics. Key concepts include scarcity, opportunity cost, supply and demand, and economic indicators like GDP and unemployment rate. Economic systems vary from market to command economies, with policies influencing fiscal and monetary aspects, while common issues include poverty and market failures.

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moorege24
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Subject: Basic Economics

What is Economics? - Economics is the study of how individuals,


businesses, governments, and societies allocate limited resources to satisfy
unlimited wants.

Branches of Economics: 1. Microeconomics – Study of individual markets


and decision-making units (households, firms) 2. Macroeconomics – Study
of the economy as a whole (inflation, unemployment, GDP)

Key Concepts: 1. Scarcity - Resources are limited, desires are unlimited -


Leads to choices and trade-offs
2. Opportunity Cost
o The value of the next best alternative foregone
3. Supply and Demand
o Law of Demand: As price falls, quantity demanded rises
o Law of Supply: As price rises, quantity supplied increases
o Equilibrium: Where supply equals demand
4. Markets and Prices
o Markets allocate resources through prices
o Prices reflect relative scarcity and preferences
5. Elasticity
o Price Elasticity of Demand: How much quantity demanded
changes with price
o Elastic (>1), Inelastic (<1)
6. Production Possibilities Frontier (PPF)
o Shows trade-offs and opportunity costs
o Efficient vs. inefficient production

Macroeconomic Indicators: 1. Gross Domestic Product (GDP) – Total


value of goods and services produced in a country 2. Unemployment Rate
– Percentage of labor force without jobs actively seeking work 3. Inflation
Rate – Percentage change in general price levels over time 4. Interest Rate
– Cost of borrowing money
Types of Economic Systems: 1. Market Economy – Decisions by
individuals and firms (capitalism) 2. Command Economy – Central
government makes decisions (socialism/communism) 3. Mixed Economy –
Combines market and government involvement

Fiscal and Monetary Policy: - Fiscal Policy: Government adjusts


spending and taxes - Expansionary: Increase spending, cut taxes (stimulate
economy) - Contractionary: Decrease spending, raise taxes (reduce inflation)
 Monetary Policy: Central bank controls money supply and interest
rates
o Tools: Open market operations, reserve requirements, discount
rate

Common Economic Issues: - Poverty and inequality - Environmental


sustainability - Globalization and trade - Market failures (e.g., monopolies,
externalities)

Tips for Studying Economics: - Practice drawing and interpreting graphs


(supply/demand, PPF) - Focus on real-world applications - Follow economic
news and trends - Learn key definitions and formulas

Further Reading/Resources: - “Economics in One Lesson” by Henry Hazlitt


- Khan Academy: Economics and Finance - Investopedia.com - The Economist
(news magazine)

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