Basic Economic Concepts…………………..:: .pptx

Basic Concept in Economics

1. BASIC ECONOMIC CONSEPTS By: Jenny and Rosel

2. INTRODUCTION Economics is a social 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 economic terms 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 impact of government intervention in economic activities. Explore the concepts of opportunity cost and trade-offs. Examine the different types of economic systems.

5. ECONOMIC TERMS AND CONCEPTS

6. Scarcity The basic economic problem 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 of the 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 point at 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 of how 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 individuals to act in a certain way. Economic incentives can be positive (rewards) or negative (penalties).

11. Principles of Supply and Demand

12. Supply Supply refers to the 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 of how 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 equilibrium occurs 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 and Demand 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.

16. Price Controls These include price ceilings (maximum prices) and price floors (minimum prices) that can lead to shortages or surpluses.

17. Taxes and Subsidies Taxes can discourage consumption of certain goods, while subsidies can encourage production or consumption.

18. Regulations Governments may impose regulations to protect consumers, workers, and the environment.

19. Opportunity Cost and Trade-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.

20. Types of Economic Systems

21. Traditional Economy An economy that relies on customs and traditions to make economic decisions. Production methods are often passed down through generations.

22. Command Economy An economy where the government makes all economic decisions, including what to produce, how to produce it, and for whom to produce.

23. Market Economy An economy where decisions are made based on supply and demand, with minimal government intervention. Prices are determined by the market.

24. Mixed Economy An economy that incorporates elements of both market and command economies. Both private and public sectors play a role in economic decision-making.

25. THANK YOU