Economy

An economy refers to the system by which goods and services are produced, distributed, and consumed within a particular region or country.

Economic Goods: Economic goods are those tangible and intangible items which have value.

Public Goods:Public goods are commodities or services that benefit all members of society, and which are often provided for free through public taxation.

Economic Development: Economic development means increase in per capita production. In other words, Improvement in living standard of people along with reduction in poverty and unemployment.

Economic Growth:Increase in total output over time in nation.

Features of Nepalese Economy: low per capita income || mass poverty || Dependecy on agriculture || Under utilization of natural resource || High trade deficit || High population growth || Remittance based economy.

uses of maths: To convert sentence into symbol || To anayyze three or more value || To find slope curves.

Minerals: An inorganic substance which occurs naturally in the earth.

Alfred Marshall

Defination: Economic means, on the one side, it is study of wealth on the other important side it is a part of the study of man. He gave this defination in late ^19th century. He said wealth is means to staisfy human wants not to end it. He said wealth is for man not man for wealth.

Features/ characterstics/ ideas:

Study of ordinary business:

Demand

The amount of goods or services that consumer is willing and able to pay at given price and at given time.

Determinants of demands:

Price of commodity

Income of consumer

Price of related goods

Taste and preferenc of consumer

Shift in Demand Curve

The change in demand curve due to change in factors other than price of the commodity. When factor other than price change in demand curve there is increase or decrease in demand. The law of demand states that there is inverse relation between price and demand, other thing remaining the same

Causes of shift in demand curve:

Change in population

Change in consumer income

Change in consumer taste or preferences

Change in advertisement

Expectation

Law of Demand: Other thing remains same, the amount demand increases with fall in price and diminishes with rise in price.

Assunmptions:

NO change in income of consumer.

No Price of related goods.

No change in taste and preferences of the consumer.

No change in habit of consumer.

No change in climate and season.

No change in fashion.

No change in population.

Supply

The amount of goods or services that producer is willing and able to offer at given price and at given time.

Determinants of supply:

Price of commodity : It has direct relationship between price of commodity to the quantity supplied. when price increase the supply also increases but when price decreases supply also decreases.
Price of others goods :
Goal of the firm :
Improvement in technology :
Government policy :
Expected future price :
Natural Factors :
Number of firms :

Law of supply: Others things remain constant, the quantity of supplied commodity id direct propotional to price of commodity.

Assumptions:

No change in price of input or factor of production
No change in state of technology
No change in goal of producer
No change in number of producer
No change in price of other goods
No change in tax.

Surplus

Utility

The want satisfying power is called utility.

Consumer Surplus: The diffrenece between actual pay and willigness to pay is called consumer surplus.

Inflation

The rise is general price level is called inflation.

Causes of inflation:

Demand pull inflation:

Reduction in tax

Increase in export

Increase in money supply and bank credit

INcrease in public expenditure

Increase in private expenditure

Rapid growth of populaiton

Cost push inflation:

Increase in wages

increase in price of key material

Increase in profit margin

Deflation

The state of economy where the value of money is rising.

Capital Formation

Increasing the stock of real capital in country. It denotes investment. In other word capital formation involves production of capital goods such as machine, tools, factories etc. which are use for creating new goods or services. . The economic of country is depends upon the available of stock.

process of capital formation:

Creation of saving: Capital formation depends upon how much you save. If you have high source of income then you tends to save more. It apply for whole economy because there are lot of people in economy if all started saving it increases capital formation. In contex of rich country there is high real capital or capital formation because there's hight per capita income so saving will be more but in poor country there is low per capita income so theres low real capital.

Mobilization of saving: It refers to use money in circulation. It means if we put money in home it is not making capital formation if we put it in bank then it make.

Investment of saving: Your capital formation got completed when your saving turn into real capital asset

Difference between Close and Open Economy

Close Economy

Close Economy	Open Economy
All economic activities occur within the country's borders.	There is international trade and exchange of goods and services with other nations.
There is no international trade or exchange of goods and services with other nations.	The economy is influenced by global market conditions and trends.
The government may impose restrictions on imports and exports.	Imports and exports of goods and services are common.
Domestic factors such as consumer spending, investment, and government policies have a significant impact on the economy.	Foreign investments, capital flows, and exchange rates play a significant role.
Closed economies tend to have higher unemployment rates than open economies.	Open economies tend to have lower unemployment rate than close economies.

Macroeconomics

Macroeconomics is a branch of economics that focuses on the behavior, structure, and performance of an economy as a whole. It examines the aggregate or total economic output, employment, inflation, and other macroeconomic indicators to understand and analyze the functioning of an entire economy.

Key concepts and topics in macroeconomics include:

Gross Domestic Product (GDP) - Measures the total value of all goods and services produced within a country's borders over a specific period.
Unemployment - Measures the number of people who are actively seeking employment but are currently without a job.
Inflation - Measures the overall increase in the prices of goods and services over time, resulting in a decrease in the purchasing power of money.
Aggregate Demand and Supply - Examines the total demand and supply of goods and services in an economy.
Monetary Policy - Involves the actions of a central bank to manage the money supply and interest rates to achieve economic goals.
Fiscal Policy - Refers to the use of government spending and taxation to influence economic activity and achieve desired macroeconomic outcomes.
Economic Growth - Focuses on the long-term increase in an economy's output and living standards.
International Trade - Considers the economic interactions and transactions between different countries.

Four-Sector Economy

A four-sector economy is an economic model that divides the economy into four sectors: households, businesses, government, and foreign.

This model is used to analyze the flow of money and goods and services in an economy.

Here are the four sectors:

Households
Businesses
Government
Foreign

The four-sector economy model is a useful tool for understanding how the economy works and for policymakers to analyze the impact of government policies on the economy.

Three-Sector Economy

A three-sector economy is an economic model that divides the economy into three sectors: households, businesses, and government.

This model is used to analyze the flow of money and goods and services in an economy.

Here are the three sectors:

Households
Businesses
Government

The three-sector economy model is a simplified version of the real economy. It does not include the foreign sector, which is important for economies that trade with other countries.

The three-sector economy model is a useful tool for understanding how the economy works and for policymakers to analyze the impact of government policies on the economy.

GDP Deflator

The measure of relative change in the current level of prices in comparision to the level of prices in thr base year.

The formula to calculate the GDP deflator is:

GDP deflator = (nominal GDP / real GDP) * 100

Disposable Income

The income received by all the individuals and the households of a country after the payment of direct tax.

Difference between GDP and GNP

Gross Domestic Product (GDP)

The money value of all the goods and services produced within the domestic territory of a country. It focuses on the economic activity within a country's geographic territory.

Gross National Product (GNP)

The money value of all the goods and services produced within the domestic territory with the domestically owned resources. It includes the economic output generated by the country's citizens and businesses, both within the country and overseas.

Differences between GDP and GNP

Gross Domestic Product (GDP)	Gross National Product (GNP)
It is narrow concept.	It is broad concept.
Does not consider net factor income earned from abroad.	Includes net factor income earned from abroad.
Can be lower or higher than GNP depending on the presence of foreign-owned businesses within the country.	Can be lower or higher than GDP depending on the income earned by domestic residents from abroad.

Economics XI