Kavishka Economics 14 5 17.docx - Table of Contents 1 Economic concepts with relevant examples.2 1.1 Scarcity.2 1.2 Opportunity cost.2 1.3 Production

Kavishka Economics 14 5 17.docx - Table of Contents 1...

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Table of Contents 1 Economic concepts with relevant examples ....................................................................... 2 1.1 Scarcity ........................................................................................................................ 2 1.2 Opportunity cost .......................................................................................................... 2 1.3 Production possibility curve (PPC) ............................................................................. 2 2 Law of demand & law of supply ........................................................................................ 3 3 Price elasticity of demand, price elasticity of supply ......................................................... 5 4 Different types of organizations that exist in the market .................................................... 6 5 Stakeholders of the organization ......................................................................................... 8 6 GDP and the methods to calculate the GDP ....................................................................... 9 7 Business cycle, unemployment & inflation ...................................................................... 10 8 Fiscal and monetary policy and how it will help to stabilize the economy ...................... 12 9 Different types of Economics systems and how they manage their resources effectively 13 10 The 4 market structures ................................................................................................. 15 11 The importance of international trade to an economy .................................................. 16 1
1 Economic concepts with relevant examples 1.1 Scarcity Scarcity simply means shortage or short of supply. Scarcity means having unlimited wants with a limited amount of resources. Society produces insufficient to supply all the needs of humans, and thus, there is a shortage, although there is a demand. The notion is that there is never enough to fulfil all the conceivable wants of humans, even with technology being so advance. Scarcity involves a tradeoff where a certain item is sacrificed to obtain the item that is needed. 1.2 Opportunity cost Opportunity cost is the loss of an alternative when one alternative is chosen over another. Thus, opportunity cost is also known as alternative cost. When a choice needs to be made among a multiple of exclusive alternatives, obviously, the best choice will be made. This is the cost incurred by not enjoying the benefit of selecting the next best alternative. Opportunity cost can be considered as a basic relationship between scarcity and choice. 1.3 Production possibility curve (PPC) Production possibility curve (PPC) is a graphical presentation of alternative production possibilities open within an economy. The productive resources available within a community can be used for the production of various alternative goods, but there is always a scarcity, and thus, a choice needs to be made between these alternatives in production. It is clear that it is the economy that chooses the goods and quality, as well as the quality of the goods produced. When certain goods are produced, other goods being produced has to be curtailed. 2
2 Law of demand & law of supply The law of demand and supply are fundamental principles in economy. The law of demand states that when all other things are equal, there is an inverse relationship between the price of goods and the quality of the product that people demand or are willing to buy. This indicates that, if the price of a good goes down, people will buy more of the good. The opposite will occur if the price of the good goes up. In the same manner, the law of supply states that when all other things are equal, there is a direct relationship between price and the quantity of the goods supplied. That means that quantity will respond to change in price by moving in the same direction. Here, the increase in price results in the increase of quantity of goods supplied.

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