This topic will introduce the basic concepts of economics such as supply and demand, market structures, economic systems, and key economic indicators that are essential for understanding the economic environment in banking and finance.
Overview of Economics – Study Notes
| Branch | Focus | Typical Topics |
|---|---|---|
| Microeconomics | Behavior of individual agents (consumers, firms, markets) | Supply & demand, elasticity, consumer theory, production theory, market structures, welfare analysis |
| Macroeconomics | Aggregate economy-wide phenomena | GDP, inflation, unemployment, fiscal & monetary policy, economic growth, business cycles, international trade & finance |
| Econometrics | Quantitative measurement of economic relationships | Regression analysis, hypothesis testing, time‑series, panel data |
| Development Economics | Economic progress in low‑income countries | Poverty, inequality, institutions, aid, growth strategies |
| Behavioral Economics | Psychological influences on economic decisions | Heuristics, biases, prospect theory, nudges |
| Element | Description | Law |
|---|---|---|
| Demand | Quantity consumers are willing & able to buy at each price | Law of Demand: Downward‑sloping; higher price → lower quantity demanded |
| Supply | Quantity producers are willing & able to sell at each price | Law of Supply: Upward‑sloping; higher price → higher quantity supplied |
| Equilibrium | Intersection of supply & demand curves | Determines market price & quantity |
| Shifts | Factors other than price (income, technology, preferences, input costs) | Move the entire curve left/right |
Key tools: Price elasticity, income elasticity, cross‑price elasticity, consumer/producer surplus.
| Structure | Number of Firms | Product Differentiation | Price Setting | Typical Example |
|---|---|---|---|---|
| Perfect Competition | Many | Homogeneous | Price taker | Agricultural markets |
| Monopolistic Competition | Many | Differentiated | Some price power | Restaurants, apparel |
| Oligopoly | Few | May be homogeneous or differentiated | Strategic interaction (game theory) | Airlines, telecom |
| ** monopoly** | One | Unique | Price maker | Utilities, patents |
Key outcomes: Efficiency, deadweight loss, role of barriers to entry.
| Aggregate | Measurement | Importance |
|---|---|---|
| Gross Domestic Product (GDP) | Value of all final goods & services produced within a country in a period | Indicator of economic activity |
| Unemployment Rate | % of labor force without work but actively seeking | Labor market health |
| Inflation (CPI, PPI) | Rate of price |