Unit 1 – Markets in Action

1. Introduction
Chapter 1  X
Chapter 2
 Scarcity of resources and unlimited wants.
 Basic economic problems
(What, How, for whom to produce)
 An economy (a system that attempt to solve the basic economic problems.)
 Economic resources (or) factors of production (or) inputs.
(Land, labor, capital, enterprise)
 Rewards for inputs.
(Rent, wage, interest, profit)

Chapter 3  Production Possibility Frontiers

Problem of scarcity  choice  opportunity cost  to show figure (PPF)

Efficiency  productive efficiency

. allocative efficiency

Chapter 4  Specialization and Division of Labor

 Specialization
 Globalization
 Productivity – labor productivity, capital productivity
 Economic sectors – primary, secondary, tertiary.
 Market
 Money  Definitions
. Functions
(Medium of exchange, measure of value, store of value, method of deferred /\/\/\/\/\/\/\/payments)
. Forms of money
(Cash, Money in current account, Near monies, Non-money financial assets, Money /\/\/\/\/\/\/\/substitutes)
 Financial Market  Definition
. Role (saving, loans, exchange of goods and services, forward market)

Chapter 5 – Types of Economy

 Economic system
 Allocation of resources (The market mechanism, planning)
 Types of Economy  Free Market Economy
. Mixed Economy
. Command Economy
 Evaluation of different types of economy.
 Choice
 Quality and innovation
 Efficiency
 Economic growth
 Distribution of income and wealth
 Risk
 Political freedom

Unit 2 – Consumer Behavior and Demand

Chapter 6 – Rational Decision Making
Maximization

 Consumers – maximum satisfaction

 Workers – maximum own welfare
 Firms – maximum profits
 Government – maximum welfare of citizens
Margin  Marginal Analysis
. M Benefits ≥ M Costs  to accept the decision

Chapter 7 – Demand
Demand

 Definition
 Law of demand
 Demand curve / Demand schedule
 Determinants of demand
(Price factor, non-price factors)
 Movement along the demand curve and shift of the demand curve.
Consumer Surplus

Chapter 8 – Price Elasticity of Demand

PED  Defn
 ∆Q
×100
% ∆∈QD Q
. Formula= =
% ∆∈ P ∆P
× 100
P
Categories of PED
1. Elastic  PED > 1
2. Inelastic  PED < 1
3. Unitary elastic  PED = 1
4. Perfect Elastic Demand  PED = ∞
5. Perfect Inelastic Demand  PED = 0
Determinants of PED

Chapter 9 – Income Elasticity of Demand and Cross Elasticity of Demand

IED  Defn
∆Q
×100
Q
. (Positive  necessity good, Negative  inferior good)
∆I
× 100
I
IED > 1  elastic
IED < 1  inelastic
IED  positive, >1  luxury
. positive, <1  necessity
. negative  inferior
CED  Defn
∆Q x
×100
Qx
.
∆ Py
×100
Py
CED  >1  elastic
. <1  inelastic
CED  positive  substitute goods (e.g., tea, coffee)
. negative  complement goods (e.g., car, petrol)