Economic Analysis

NMIMS - Economic analysis

Ten principles of economics

How people make decisions (a) People face trade-offs (b) the cost of something is what you have to give up to get it (c) Rational people think at the margin (d) people respond to incentives How people interact (a) Trade can make everyone better off (b) Markets are usually a good way to organise economic activity (c) Government can sometimes improve market outcomes. How an economy as a whole works (a) A countrys standard of living depends on its ability to produce goods and services (b) Prices rise when the government prints too much money (c) Society faces a short-run trade-off between inflation and unemployment.

NMIMS - Economic analysis

 What is economics? (a) scarce resources-prices as a signalling mechanism. (b) Multiple uses Concept of opportunity cost. Concept of production possibility frontier Macro-economy level analysis egs: inflation, Growth rate of the economy, unemployment Micro economics-firm/individual level analysis (a) industrial economics studying the entry and exit of firms into an industry- importance of brands. (b) health economics- insurance programs (c) urban economics- study of pollution, congestion in cities (d) financial economics- optimal portfolio, rates of return on assets, corporate financial beaviour

Circular flow of national income.

NMIMS - Economic analysis

Factors determining the demand for a product

Price Income Expectations Number of buyers Prices of related goods (Substitutes/Complements) tastes and preferences

NMIMS - Economic analysis

 Movement along the demand curve Shifts in the demand curve-outward and inward shifts Supply curve- determinants of the supply curve input prices, technology, expectations of prices, number of sellers. Movement of the supply curve Shifts of the supply curve Concept of equilibrium
NMIMS - Economic analysis

Concepts which will be discussed

Opportunity cost Law of diminishing marginal utility (a) concept of utility (b) Concept of total utility, marginal utility.

NMIMS - Economic analysis