Understanding Economic Principles: Key Concepts from ECON 201
Introduction to Economics
- Definition: Economics is the study of scarcity, how people use resources, and respond to incentives.
- Branches: Microeconomics (individuals and firms) & Macroeconomics (national & global economy).
Supply and Demand
- Law of Demand: Inverse relationship between price and quantity demanded.
- Law of Supply: Direct relationship between price and quantity supplied.
- Market Equilibrium: Point where supply equals demand.
Elasticity
- Price Elasticity of Demand: Measures responsiveness of quantity demanded to price changes.
- Inelastic (<1), Elastic (>1), Unitary (=1)
- Price Elasticity of Supply: Measures responsiveness of quantity supplied to price changes.
Consumer Behavior
- Utility: Satisfaction or pleasure derived from consuming a good.
- Marginal Utility: Additional satisfaction from consuming one more unit.
Production and Costs
- Production Function: Relationship between inputs and maximum output.
- Short Run vs Long Run: Short run has fixed inputs, long run all inputs are variable.
- Costs:
- Fixed Costs: Do not change with output level.
- Variable Costs: Change with output level.
Market Structures
- Perfect Competition: Many firms, identical products.
- Monopolistic Competition: Many firms, differentiated products.
- Oligopoly: Few firms dominate.
- Monopoly: Single seller.
Government Intervention
- Purpose: Correct market failures, redistribute income, regulate industries.
- Tools: Taxes, subsidies, regulations.
Macroeconomics: National Economy
- GDP: Total value of goods and services produced.
- Unemployment: Measure of those who are jobless but seeking work.
- Inflation: Rate at which general level of prices for goods/services rises.
Fiscal and Monetary Policy
- Fiscal Policy: Government spending and taxation decisions.
- Monetary Policy: Central bank actions to control money supply and interest rates.
International Economics
- Trade: Benefits of comparative advantage.
- Exchange Rates: Value of one currency for the purpose of conversion to another.
Conclusion
- Economics is crucial for understanding how societies utilize resources and make decisions.
These notes cover fundamental concepts from ECON 201, providing a framework for understanding economic principles and their applications.