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Scarcity

The core problem of economics due to unlimited wants and needs but limited resources.

Microeconomics

Studies the behavior of individual entities like consumers and producers, focusing on supply and demand.

Macroeconomics

Examines the overall performance of the economy at an aggregate level.

Adam Smith

Known as the Father of Economics, advocated laissez-faire policy, capitalism, and the concept of the invisible hand.

Law of Comparative Advantage

States that one should produce a good or service more efficiently than others to gain a competitive edge.

Law of Diminishing Marginal Returns

Predicts that adding more factors of production beyond a certain point will result in smaller output increases.

Law of Diminishing Marginal Utility

Asserts that the satisfaction gained from consuming additional units of a good decreases over time.

Production

The process of combining inputs to create output, utilizing resources like land, capital, labor, and entrepreneurship.

Allocation

The distribution of resources to individuals based on traditional, command, market, or mixed systems.

Demand

Reflects the consumer's willingness to purchase goods or services at a given price.

Supply

Represents the producer's willingness to offer goods or services at a given price.

Law of Supply & Demand

Describes the relationship between the availability of a good or service and its demand.

Substitute Good

A product that can replace another, impacting demand when prices change.

Complementary Good

Items that are used together, influencing demand when prices fluctuate.

Metrics of Economic Growth

Includes GNP, GDP, and net factor income from abroad to measure a country's economic performance.

Metrics of Economic Development

Utilizes the Human Development Index (HDI) to assess social and economic progress.

Inflation

The continuous rise in the prices of goods and services.

Unemployment

Refers to individuals willing and able to work but without a paid job.

Fiscal Policy

Involves government spending and taxation to influence the economy, with expansionary and contractionary approaches.

Monetary Policy

Managed by central banks to regulate money supply and interest rates, with expansionary and contractionary measures.

New Growth Theory

Emphasizes that ongoing productivity and economic growth are driven by the desires and needs of the population.