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Recap of Economics

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December 21, 2019

what is economics, areas of economics, economics means

What is Economics:

As outlined by Paul Samuelson: The study of how a person or society meets its unlimited needs, and desires through the effective allocation of resources.

Why Economics & it’s Growth matters:

It suggests the simplest way of understanding how to make the best use of obtainable resources.

why economic growth matters, what is economic growth

 

The underlying essence of Economics is attempting to know how both Individuals & nations behave in response to certain material constraints.

  • Economic growth is about increase in production within the economy
  • It is significant because our living standards are influenced by our access to goods & services
  • With economic growth we can all be potentially well off

Type of Economics:

Micro & Macro economics, type of economics

 

  1. Macro – Study of Economy at the massive scale – It is a study of the whole economic system & its factors that touching the whole economy including GDP inflation, monetary & fiscal policies.

 

  1. Micro – Study of Economics at the level of individual, group of consumers. It explains how the individual or firms make decisions to allocate the limited resources.

difference between macro & micro economics, major distinction between macro & micro economics, what is macro & micro economics

Demand and Supply:

It is a backbone of a market economy. It is a relationship between the quantity of a commodity that producers want to sell at different prices & the quantity that consumers want to buy.

In equilibrium, the quantity of a supply of food by the producers equals the quantity demanded by consumers.

 

Elasticity of Demand: 

Here, the change in quantity demanded due to a change in price is large.

elastic demand, demand elasticity meaning

 

3 main reasons to influence Elasticity of Demand:

  1. The availability of Substitutes
  2. Amount of income available to spend on the goods
  3. Time

 

E.g. to calculate Elasticity:

When the cost decreases from $10 per unit to $8 per unit, the quantity sold increases from 80 units to 50 units. The elasticity co-efficient is 2.25:

(50-30) / (50+30) / ($10-$8) / ($10+$8)  = 20/80 / $2/$18

= 1/4 / 1/9  = 1*9 / 1*4  = 9/4 = 2.25

 

Economy Equilibrium:

 

equilibrium of prices, market & demand equilibrium, market price & demand intersection

 

This is a point where supply equals demand for a product. It’s maintained by raising or lowering the price in response to changes in the supply or demand. Economy price is where the hypothetical supply & demand curves intersect.

 

 

GDP (Gross Domestic Product):

GDP is the main tool for measuring a health of a country’s economy. It refers to the entire worth of all goods & services produced over a specific time period

 

GDP Calculation:

GDP, Expenditure method, Gross Domestic Product

It can be done by 2 ways:

1. Income approach:  Adding up what everyone earned in a fiscal year.

 

GDP = R (Rate) + I (Interest) + SA (Dividends, Corporate Profit) + W (Wages) + P (Profit)

 

2. Expenditure Method:  It is a way of calculating GDP which adding up what everyone spent likes Compensation, Investment & net Exports.

Y = C (Compensation) + I (Investment) + G (Govt. Spending) + XM (Export-Import)

 

 

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Delhi, IND

Hi Guys ... Welcome to oxiclick.com. Myself Shilpa Meena, born & raised in Delhi, India. I am a Finance skilled professional. Graduated in English (Hons.), MBA in International Business. I love to theatre, travel & questioned everything. While operating for few years in the corporate sector, I realised to share the inner world of it, the cut-throat competition & work-life balance and few learnings / challenges. And the way hobbies like Travel, Blogging will take you off from of these although for a short while. Though every body has different outlook of looking, wanting & absorbing things thus do I. Hence, I launched oxiclick.com in mid of 2018, to share my experience around cosmic corporate world, modern finance gimmick & of course some enthralling travelling snapshots. Do like, share & suggest on my posts that will prompt me to put my experience in writing.