Basic Concepts In Economics (INTRODUCTION_TO_ECONOMICS)

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Economic Goods

Simply Economic good refers to a thing which demands price for use, buy and exchange.

• Economic goods are manmade such as, Pen, book, computer etc.
• They have cost of production.
• They are always limited in supply which means less than to demand.
• The ownership can be transferred from one to another. That's why there is value in both exchange and use.
• all above points refers to economic goods.

Capital goods

These refers to goods which are used to produce other goods. Capital goods are also called as producer goods. They are used in production process. They satisfy human wants indirectly. for example, Machinery, Tools, buildings, equipment, etc.

Intermediate goods

The goods which are under the process of production are called as intermediate goods or Semi finished goods. They are again transferred to different industries and factories to make consumer or final commodities. for example, Cotton, fibre, thread etc.

Wealth

In economics wealth refers to assets or things which have ability to earn income or money is called as wealth. Anything which can earn income or cause to earn income is considered as wealth.

Wealth has 3 main features. They are: 

• Utility: Satisfying power of a commodity.
• Scarcity: Unavailability of a resource to use.
• Transferability: Transfer of wealth from one person/firm to another for use.

Income

Income refers to flow of satisfaction from one wealth per unit of time. In every economy Income flows/moves from households to firms and vice versa. Households are the main resources for investments and capital formation which leads to development in growth of an economy. Income can be expressed in two ways:

• Money Income: It is in terms of money.
• Real Income: It is in terms of goods and services.

Utility

The want satisfying power of a commodity for a particular period of time is called as Utility. Services also can indirectly satisfy human wants. So, Services are also considered as one of the types in Utility. Utility is a subjective concept which means no one can measure the value of utility for a commodity or service mathematically (in terms of numbers) or any value.

Exchange value

It is the purchasing power of a commodity to exchange or buy other commodity. All economic goods/commodities have exchange value which means they have power to exchange or transfer the commodities to 1 person to another. Generally Money acts as an exchange value to purchase the goods and services.

Price

It refers to a value of measurement of anything in terms of money is called as price. For example, Exchange of chocolates in the shop which have the value of 20 R.S for 20 R.S money. 

If a value of any commodity or service is measured in terms of money, Then it is called as price.

Choice problem

Simply Choices of problem refers to allocation of resources to satisfy wants in alternatively for unlimited wants of humans. It is the main problem in economics of what to produce, When to produce, what society really needs, etc. It is the problem of choice between production of commodities and the techniques in production (amount of production).

Deductive method

Deductive method is the process of analysing from general to particular or from the universal to individual. It draws conclusions in right way by focussing on general truths. This method is useful to prove a theory and laws in right conclusions. In this method The fact is universal to all members.

Inductive method

Inductive method is associated with the statistics of a particular data to general conclusions. It is the process from particular to general observations or from individual to universal. 

Economics statistics or (Static analysis)

It refers to functional relationship between 2 variables whose values are related to same point and time. This concept was introduced by John Stuart Mill (JS Mill). The analysis is very narrow because it analyses only the equilibrium in the same time. It is also called as timeless analysis.

Economic dynamics or (Dynamic analysis)

This concept was introduced by JS mill in economics. It refers to the analysis where the variables are belongs to relevant or closely related in different times. It analyses the equilibrium as well as disequilibrium points also. 

That's why this concept is very wider than static analysis in economics.

Partial equilibrium

It was popularised by Marshall (A British Economists) It exist when an equilibrium relates to single variable, item or data. If the data of equilibrium is relates to only a particular area, then it is called as partial equilibrium.

General equilibrium

This concept was introduced by French economist Leon Walras. General equilibrium exist when an equilibrium relates to number of variables in an economy as a whole unit. It exist when equilibrium of consumers (Satisfaction) and firms (profits) are under equilibrium in all firms in an economy. It happens when 

there is stability in all firms.

Micro Economics

The word Micro is derived from the Greek words "micros" which means small. It was developed my Marshall. It is the study of individual units such as, individual prices, individual demand, supply, individual income etc. It is also called as "Price theory".

Macro economics

The word Macro is derived from Greek words "Macros" which means large or big. It was developed by J.M Keynes.  It studies all aggregate values in the economy as a whole or single unit such as, aggregate income (Total income), total employment, general prices, inflation etc. It is also called as "Income and employment theory".

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