The Five Concepts of Economics Everyone Must Know

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You are not a fully functioning adult till you don’t grasp these fundamental economics concepts.Let’s dive straight to them:

#1. Economics has two main streams – Micro and Macroeconomics. Micro economics deals with customer behavior, pricing, margins. Macro deals with broad economies and larger stuff like interest rates, GDP, and other stuff.

#2. Law of Supply and Demand- This is the building block of economics. To put it simply, price of product is governed by the supply of that product and the demand for it. Thus, when there is excess production of Potato, prices of potato decreases. Think of intuitively, and you’ll see the Law of Supply and Demand governing a lot of things around you.

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#3. Marginal Utility- When you have more of something, it’s use for you diminishes. Thus a Rs 1000 note is more valuable when you are earning Rs 5000 than when you are earning Rs 1,00,000. Same logic applies when you call for the 5th helping of Kebabas at BBQ Nation just because it’s a all-you-can-eat meal. There’s no way it will bring the same satisfaction that the first helping brought.

#4. Gross Domestic Product- This is how every economy is measured in size. Conceptually GDP is equal to the sum of income of all people in the country, or the sum of the market value of all goods and services produced in that country.

#5. Inflation- Intuitively you know things are more expensive now than they were back when your dad was growing up. Inflation is a measure of how much a bunch of products have increased in prices since last year.

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