1.
Basic Economic Concepts
● Economics: The study of how individuals and societies allocate limited resources to
satisfy unlimited wants.
● Opportunity Cost: The next best alternative forgone when making a decision.
● Scarcity: The limited nature of resources in comparison to unlimited human wants.
● Factors of Production: Resources used to produce goods and services (Land, Labour,
Capital, and Enterprise).
● Economic Problem: The problem of how to allocate scarce resources among
competing uses.
2. Demand and Supply
● Demand: The quantity of a good or service consumers are willing and able to buy at a
given price in a given time period.
● Supply: The quantity of a good or service producers are willing and able to offer at a
given price in a given time period.
● Market Equilibrium: The point where quantity demanded equals quantity supplied,
determining the market price and quantity.
● Price Elasticity of Demand (PED): A measure of the responsiveness of quantity
demanded to a change in price.
● Price Elasticity of Supply (PES): A measure of the responsiveness of quantity supplied
to a change in price.
● Inferior Goods: Goods for which demand decreases as income rises.
● Normal Goods: Goods for which demand increases as income rises.
● Substitutes: Goods that can replace each other, where an increase in the price of one
leads to an increase in demand for the other.
● Complements: Goods that are often used together, where an increase in the price of
one leads to a decrease in demand for the other.
3. Market Structures and Types
● Perfect Competition: A market structure with many buyers and sellers, homogeneous
products, and no barriers to entry.
● Monopoly: A market structure where a single firm dominates the market with no close
substitutes.
● Oligopoly: A market structure with a few large firms dominating the market.
● Mixed Economy: An economy that combines elements of both the private and public
sectors.
4. Production and Costs
● Total Cost: The total expense incurred in the production of goods (Fixed Cost + Variable
Cost).
● Fixed Costs: Costs that do not change with the level of output.
● Variable Costs: Costs that change directly with the level of output.
● Economies of Scale: Cost advantages gained by increasing the scale of production.
● Productivity: Output per unit of input, such as labour or capital.
5. Government and the Economy
● Inflation: A sustained increase in the general price level of goods and services.
● Deflation: A sustained decrease in the general price level.
● Unemployment: The number of people who are willing and able to work but are unable
to find a job.
● Gross Domestic Product (GDP): The total value of goods and services produced in a
country within a given period.
● Fiscal Policy: Government policy regarding taxation and spending to influence the
economy.
● Monetary Policy: The central bank's management of interest rates and the money
supply to influence the economy.
● Subsidy: Financial assistance provided by the government to encourage production or
consumption of certain goods.
● Tax: A compulsory financial charge imposed by the government on individuals or firms.
● Progressive Tax: A tax system where the tax rate increases as income increases.
● Regressive Tax: A tax system where the tax rate decreases as income increases.
6. International Trade and Globalization
● Imports: Goods and services bought from foreign countries.
● Exports: Goods and services sold to foreign countries.
● Balance of Payments: A record of all transactions made between one country and the
rest of the world.
● Exchange Rate: The value of one currency in terms of another.
● Tariff: A tax on imported goods.
● Quota: A limit on the quantity of a good that can be imported or exported.
● Protectionism: The practice of shielding domestic industries from foreign competition
through tariffs, quotas, or other trade barriers.
● Globalization: The increasing integration and interdependence of national economies.
7. Development Economics
● Developed Economy: A country with a high level of income, industrialization, and
standard of living.
● Developing Economy: A country with a lower standard of living, underdeveloped
industrial base, and low Human Development Index (HDI).
● Sustainability: Meeting the needs of the present without compromising the ability of
future generations to meet their own needs.
● Standard of Living: The level of wealth, comfort, and material goods available to a
person or community.
● Human Development Index (HDI): A composite index measuring average achievement
in three basic dimensions of human development—health, education, and income.
8. Market Failure
● Market Failure: A situation where the market fails to allocate resources efficiently.
● Externalities: Costs or benefits that affect third parties who are not involved in the
economic transaction (Positive and Negative).
● Public Goods: Goods that are non-excludable and non-rivalrous, such as street lighting.
● Merit Goods: Goods that are under-consumed and under-provided by the market but
are beneficial to society (e.g., education, healthcare).
● Demerit Goods: Goods that are over-consumed and harmful to society (e.g., tobacco,
alcohol).
9. Labour Market
● Wage Rate: The amount of money paid to workers for their labour.
● Labour Force: The total number of people employed or seeking employment.
● Trade Union: An organization of workers that aims to protect their rights and improve
wages and working conditions.
● Minimum Wage: The lowest legal wage that can be paid to workers.
