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Adam Smith is the Father of Modern Economics.
Economics is the study of how wealth is produced and consumed.
Smith’s definition is known as Wealth Definition.
Welfare Definition is coined by Prof. Alfred Marshal.
Scarcity Definition is coined by Prof. Lionel Robbins.
Micro Economics is concerned with the behaviour of individual entities such as markets, firms, and households.
Macro Economics is a branch of Economics that deals with the performance, structure and behaviour of a national or regional economy as a whole and concerned with the overall performance of the Economy.
Founder of the field of Macro Economics is John Maynard Kenes.
John Maynard Kenes wrote the book “General Theory of Employment, Interest and Money”.
A market Economy/ Capitalistic Economy is one in which individuals and private firms make the major decisions about production and consumption. E.g.: United Kingdom.
A Command Economy/Socialistic Economy is one in which the government makes all important decisions about production and distribution.
Mixed Economy is where public sector, private sector and joint sector coexist and complement each other. E.g.: India
Laissez – faire Economy is the extreme case of a Market Economy.
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Quantity and Price are inversely related.
Law of Downward – sloping demand: When the Price of a commodity is raised (and other things being constant), buyers tend to buy less of the commodity. Similarly, when the price is lowered, other things being constant, quantity demanded increases.
The Supply Schedule relates the quantity supplied of a good to its market price, other things being constant.
Supply increases (or Decreases) when the amount supplied increases (or Decreases) at each market price.
Supply and demand interacts to produce equilibrium price and quantity or market equilibrium.
A Market equilibrium comes at the price at which quantity demanded equals quantity supplied.
The Equilibrium Price is also called as the Market Clearing Price.
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