Some Basic concepts in Economics

Utility: Capacity of satisfying need/wants. Pen to student and marker to a teacher in the classroom.
Production: Creation of utility with exchange value. Chair from wood is a production because it has both utility and
exchange value. But boat from a piece of paper has utility to a baby but it does not have exchange value. So, it is not a
production.
Consumption: Destruction of utility through use. Consumption has two condition: 1) Destruction of utility 2) It must be
used.
Distribution: Sharing of wealth among the 100
agents or the owners of the agents which have been active in its production.
% Equality curve
Land: : Rent of
Labour : Wage In 50
Lorenz curve: indicates
Capital : Interest co
25 the unequal distribution
Management : Profit m
of income of a country.
e
25 50 100
% of population
Basic Concepts in Economics
• Types of Economics:
• 1) Microeconomics: deals with individual
• 2) Macroeconomics: deals with national
Another two types:
1) Positive economics
2) Normative economics