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Basic Economic Concepts…………………..:: .pptx
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- 2. INTRODUCTION Economics is asocial science that studies how individuals, businesses, governments, and societies make choices about allocating resources. It encompasses a wide range of topics, including production, consumption, distribution, and the behavior of economic agents.
- 3. Objectives 1 2 3 Define key economicterms and concepts. Explain the principles of supply and demand. Discuss the role of markets and prices in an economy.
- 4. Objectives 4 5 6 Analyze the impactof government intervention in economic activities. Explore the concepts of opportunity cost and trade-offs. Examine the different types of economic systems.
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- 6. Scarcity The basic economicproblem that arises because resources are limited while human wants are unlimited. Scarcity forces individuals and societies to make choices about how to allocate resources effectively.
- 7. Opportunity Cost The value ofthe next best alternative that is forgone when a choice is made. For example, if a student chooses to spend time studying instead of working a part-time job, the opportunity cost is the income they could have earned during that time.
- 8. Market Equilibrium The pointat which the quantity of a good or service demanded by consumers equals the quantity supplied by producers. At this point, the market is said to be in balance.
- 9. Elasticity A measure ofhow much the quantity demanded or supplied of a good responds to changes in price. Goods can be elastic (sensitive to price changes) or inelastic (not sensitive to price changes).
- 10. Incentives Factors that motivate individualsto act in a certain way. Economic incentives can be positive (rewards) or negative (penalties).
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- 12. Supply Supply refers tothe quantity of a good or service that producers are willing and able to sell at various prices. The law of supply states that, all else being equal, an increase in price results in an increase in quantity supplied. This relationship can be illustrated with a supply curve, which typically slopes upward from left to right.
- 13. Demand A measure ofhow much the quantity demanded or supplied of a good responds to changes in price. Goods can be elastic (sensitive to price changes) or inelastic (not sensitive to price changes).
- 14. Market Equilibrium Market equilibriumoccurs when the quantity supplied equals the quantity demanded. At this point, the market price stabilizes, and there is no tendency for it to change unless an external factor affects supply or demand.
- 15. Shifts in Supply andDemand Factors such as consumer preferences, income levels, and the prices of related goods can cause shifts in the demand curve. Similarly, changes in production costs, technology, and the number of suppliers can shift the supply curve.
- 17. Price Controls These includeprice ceilings (maximum prices) and price floors (minimum prices) that can lead to shortages or surpluses.
- 18. Taxes and Subsidies Taxescan discourage consumption of certain goods, while subsidies can encourage production or consumption.
- 19. Regulations Governments may impose regulationsto protect consumers, workers, and the environment.
- 20. Opportunity Cost andTrade-offs Every economic decision involves trade-offs, as choosing one option typically means giving up another. Understanding opportunity cost is crucial for making informed decisions.
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- 22. Traditional Economy An economythat relies on customs and traditions to make economic decisions. Production methods are often passed down through generations.
- 23. Command Economy An economywhere the government makes all economic decisions, including what to produce, how to produce it, and for whom to produce.
- 24. Market Economy An economywhere decisions are made based on supply and demand, with minimal government intervention. Prices are determined by the market.
- 25. Mixed Economy An economythat incorporates elements of both market and command economies. Both private and public sectors play a role in economic decision-making.
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