The basics of economics

Furniture used in the home is wealth but given on rent is capital.

The basics of economics

Financial wealth is excluded from national wealth. Types of Economic Systems Economic systems are defined either by the way that stuff is produced or by how that stuff is allocated to people. Elasticity is another key concept in economics.

basic economic concepts and theories

Scarcity: Mere utility does not create value unless it is scarce. It is preferable for a country to see increasing values of production and capacity utilization at high levels.

Basic economic concepts answers

They can also be very useful for investors to judge how economic conditions will move markets and to guide investment decisions. But capital is that part of wealth which is used for further production of wealth. Quite often, prices go up because supply is down and demand is up. Monetarists have generally favorable views on free markets as the best way to allocate resources and argue that stable monetary policy is the best course for managing the economy. Money is a stock but the spending of money is flow. A consumer wants to buy the best combination of a consumer good when his objective function is to maximise his utility, given his fixed income as the constraints. For this reason, the concepts of efficiency and productivity are held paramount by economists. It studies how individuals, businesses, governments, and nations make choices on allocating resources to satisfy their wants and needs, trying to determine how these groups should organize and coordinate efforts to achieve maximum output. Thus goods possessing the quality of scarcity have value. The former is called the law of demand, and latter is called the law of supply. First and foremost, it's important to understand how prices are set in a market economy. Neoclassical economics studies the behaviour of individuals , households , and organizations called economic actors, players, or agents , when they manage or use scarce resources, which have alternative uses, to achieve desired ends.

Supply and Demand is one of the first things we learn in economics. Thus a commodity to have value-in-exchange must possess the qualities of utility, scarcity and transferability. Taking a holistic example in lieu of an easier and obvious one — research proves that the money one earns contributes hugely towards average life happiness in the initial stages of getting those riches, but its role tapers off sharply as the income grows.

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Economics Definition: Overview, Types, and Economic Indicators