Basic Concepts in Economics for Undergraduate Students

The PPT explains about the basic concepts with examples. the concepts are as Demand and supply, opportunity cost, marginal utility, Elasticity, GDP, Inflation, unemployment, Comparative advantage, value for money, fiscal policy, and monetary policy, and purchasing power parity.

1. Basic Concepts in Economics

2. it has two streams. Macroeconomics: Macro means large. Macroeconomics deals with large economic-related issues like a whole entity or a big organization or the entire nation or the whole city or a complete project etc. Inflation, annual budgets, scarcity, poverty, etc. can come under macroeconomics. Microeconomics: On the other hand, micro means small. Microeconomics deals with small units, single apartments, individual plants, household activities, part of your project, a single event, etc. that come under the microeconomics.

3. Supply and Demand Demand: Quantity of a product desired by buyers. Example: Lower price of ice cream increases quantity demanded. Supply: Quantity of a product market can offer. Example: Higher price of ice cream increases quantity supplied. Equilibrium Price: Price where quantity demanded equals quantity supplied. Example: Ice cream equilibrium price at $2 per scoop.

4. Opportunity Cost Cost of forgoing the next best alternative when making a decision. Example: Time spent studying vs. working or leisure. Example: Investing $1,000 in stocks vs. savings account interest.

5. Marginal Utility Additional satisfaction from consuming an additional unit of a good. Example: First slice of pizza offers more satisfaction than the second.

6. Elasticity Price Elasticity of Demand: Responsiveness of quantity demanded to price change. Example: 10% increase in luxury car prices causes 20% decrease in demand. Price Elasticity of Supply: Responsiveness of quantity supplied to price change. Example: Coffee production increases with price rise.

7. Gross Domestic Product (GDP) T otal value of all goods and services produced in a country over a specific period. Example: Country A produces $500 billion worth of goods and services in a year.

8. Inflation Rate at which general level of prices for goods and services is rising. Example: 2% inflation means a basket of goods costing $100 this year will cost $102 next year.

9. Unemployment Number of people actively looking for work but can't find jobs. Example: 5% unemployment rate means 50,000 out of 1 million labor force are unemployed.

10. Comparative Advantage Ability to produce a good at a lower opportunity cost than another. Example: Country A specializes in wine, Country B specializes in cheese, both trade to benefit.

11. Fiscal Policy Government spending and taxation to influence the economy. Example: Increasing infrastructure spending during a recession to stimulate the economy.

12. Monetary Policy Central bank management of money supply and interest rates. Example: Raising interest rates to reduce inflation during an overheated economy.

13. Value for Money: - It is one of the important concepts in economics because the value of money may vary from time to time based on different factors. It refers to utility that is derived from every money a consumer spends.

14. Purchasing Power: Another fundamental economic concept is the purchasing power of consumers because if we take gold as an example, even though the price of gold is reduced, the buyer may not have the ability to purchase food at that particular time. If he can purchase some amount of gold, the price may increase. That ability of the consumer is called the purchasing power. Purchasing_Power_Parity_India_vs_America.docx