LET'S TALK ABOUT

E MARKET SYSTEM
TH
CREATED AND PRESENTED BY:
AARAMYA GUPTA
 MAJOR TOPICS

The basic economic The demand and Market

EXTERNALITIES
problem supply curve equilibrium

Price elasticity The mixed economy

 What is the basic economic problem?
EXPLAINED IN SHORT AND BRIEF PARAGRAPHS

All countries have resources, such as water, minerals,

soil, plants, animals and
people. However, in any country there is a finite
THE BASIC ECONOMIC quantity of these resources,
PROBLEM which means that the quantity available is limited.
The fundamental economic problem results from the
mismatch between limited resources and unlimited
wants. It is referred to as 'scarcity' by economists.
Scarcity occurs when society cannot fulfill all its
wants because resources are limited.

The three basic problems of economics are:

What to produce.
How to produce.
For whom to produce.
 The demand curve
HOW DO YOU EXPLAIN THE DEMAND CURVE?

A DEMAND CURVE IS A GRAPH THAT SHOWS THE RELATIONSHIP BETWEEN THE PRICE OF A GOOD OR SERVICE
AND THE QUANTITY DEMANDED WITHIN A SPECIFIED TIME FRAME

Demand curves can be used to understand

the price-quantity relationship for
consumers in a particular market. They
take the shape of a straight (linear) line or
curve (nonlinear). A linear demand curve
typically slopes downward as it moves to
the right, demonstrating the inverse
relationship between the quantity of
products demanded (x-axis) and its price
(on the y-axis) at a particular point in time

Price and quantity demanded have an inversely proportionate relationship because the more the prices are, the less the
demand for them would be- vise versa
Factors affecting the demand curve
Price of the Product
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The Consumer's Income
The Price of Related Goods/substitutes
The Price of complimentary goods
The Tastes and Preferences of Consumers.
The Consumer's Expectations
The Number of Consumers in the Market
 The supply curve
HOW DO YOU EXPLAIN THE SUPPLY CURVE?

A SUPPLY CURVE IS A GRAPH THAT SHOWS THE RELATIONSHIP BETWEEN PRICE AND SUPPLY. AS PRICES RISE,
QUANTITY SUPPLIED ALSO TYPICALLY RISES.

In economics, supply is the amount of a

resource that firms, producers, labourers,
providers of financial assets, or other
economic agents are willing and able to
provide to the marketplace or to an
individual. Supply can be in produced
goods, labour time, raw materials, or any
other scarce or valuable object.

Price and quantity supplied have a directly proportionate relationship because the more the prices are, the more the supply for them
would be- vice versa
Factors affecting the supply curve
PRICE OF GOODS
PRICE OF SUBSTITUTES
PRODUCTION CONDITIONS
FUTURE EXPECTATIONS
INPUT COSTS
NUMBER OF SUPPLIERS
GOVERNMENT POLICY
 Market equilibrium
WHERE MARKET SUPPLY AND DEMAND BALANCE EACH
OTHER, AND AS A RESULT PRICES BECOME STABLE.

OVERVIEW:

Market equilibrium refers to a situation where quantity

demanded and quality supplied of a good are equal. In
other words, market equilibrium is a situation of zero
excess demand and zero excess supply. Generally, an
over-supply of goods or services causes prices to go
down, which results in higher demand—while an under-
supply or shortage causes prices to go up resulting in less
demand. If the point is above the equilibrium, the quantity
of the good supplied exceeds the quantity of the good
demanded-vise versa
 Price elasticity
THERE'S 3 TYPES- PRICE ELASTICITY OF DEMAND, PRICE ELASTICITY OF
SUPPLY AND INCOME ELASTICITY

A good's price elasticity of demand is a measure

of how sensitive the quantity demanded is to its
price. When the price rises, quantity demanded
falls for almost any good, but it falls more for Price elasticity of supply is the responsiveness of a
some than for others. Formula- % change in supply of a good or service after a change in its
quantity demanded / % change in price market price. According to basic economic theory,
the supply of a good will increase when its price
rises. Conversely, the supply of a good will decrease
when its price decreases.
Income elasticity of demand describes the sensitivity to changes
in consumer income relative to the amount of a good that
consumers demand. Highly elastic goods will see their quantity
demanded change rapidly with income changes, while inelastic
goods will see the same quantity demanded even as income
changes.
 THE MIXED ECONOMY
A mixed economic system is a system that combines aspects
of both capitalism and socialism. A mixed economic system
protects private property and allows a level of economic
freedom in the use of capital, but also allows for
governments to interfere in economic activities in order to
achieve social aims. It allows private ownership of
productive activities but under the government's
regulation. The government intervenes in providing public
goods and services, such as transportation, energy,
communication, health care, banking, and defense. Most
modern economies are examples of mixed economies,
although various economists often criticize them for their
economic consequences.
Types of mixed economy
Partial State Control: The private sector owns and operates most of the
factors of production, such as factories, machinery, and plants, while the
government regulates their activities and provides some public goods
and services. This is the case in most developed Western countries.

Total Government Control: The state has a direct influence on the

functioning of the enterprises. It invests its own money into the business
and is solely responsible for its operations. It bears the risk of loss and
owns the profits of the companies. This is often seen in socialist or
communist countries.

Public-Private Control: A joint venture exists between the state and

private players. They share the ownership, management, and risks of the
enterprises. This can be done to promote strategic industries or to foster
innovation and development. Some Asian countries like India have this
type of mixed economy.
 Privatization occurs when a government-owned business,
operation, or property becomes owned by a private, non-
government party. Privatization also may describe a transition
that takes a company from being publicly traded to becoming
PRIVATISATION privately held. This is referred to as corporate privatization.
Privatization of public services has occurred at all levels of
government within the United States. Some examples of
services that have been privatized include airport operation,
data processing, vehicle maintenance, corrections, water and
wastewater utilities, and waste collection and disposal. Some
advantages of privatisation are: increased revenue, reduction
in government borrowing, promotion of competition and the
promotion of efficiency. Some disadvantages of privatisation
are: monopoly abuse, short term is valued more than the long
term, free lunch syndrome and 'selling the family silver'.
 In economics, an externality or external cost is an indirect cost
or benefit to an uninvolved third party that arises as an effect
of another party's activity. Externalities can be considered as
EXTERNALITIES unpriced goods involved in either consumer or producer
market transactions. An externality can also be generated
when something is made (i.e. a production externality) or used
(i.e. a consumption externality). Pollution caused by
commuting to work or a chemical spill caused by improperly
stored waste are examples of externalities. Basic examples of
NEGATIVE externalities can be defined as- Air pollution
production, Water pollution production, Farm production,
Garden production, Traffic congestion consumption, Noise
consumption, Secondhand smoke consumption and Strobe
light consumption.