Lesson-1 on Economics

Question:  What is Economics?

Answer:

Economics is the study of the use of limited productive resources in a society to satisfy unlimited desires of its members.

Question:  What is Difference between Micro & Macro Economics?

Answer:

Micro-Economics

Ø Microeconomics deals with the analysis of individual units of the economy.

Ø It studies individual consumers, individual firms, prices, wages, income, expenditures of a particular household.

Macro-Economics

Ø Macro Economics deals with the analysis of economy as a whole

Ø It studies total national output & income, total employment, total consumptions, aggregate investments, GDP, GNP etc.

Question:  What is Opportunity Cost ?

Answer:

The cost of choosing to use resources for one purpose measured by the sacrifice of the next best alternative for using those resources.

Question:  What is Gross Domestic Product (GDP)?

Answer:

The value in money at market prices of all goods and services produced within a country but excluding the income form abroad for a particular period, generally one year.

Gross Domestic Product (GDP) = Market prices of all goods and services produced within a country – Income from abroad

Question:  What is Gross National Product (GNP) ?

Answer :

A country’s total output of goods and services from all forms of economic activity measured at market prices for a calendar year.

Gross National Product (GNP) = Total value of goods and services produced in a national economy in a calendar year + Net Income from abroad.

 

Question:  What is Net National Product(NNP) ?

Answer:

Net National Product (NNP) = Gross National Product(GNP) – Allowance for Depreciation on capital goods

 

Question:  What is Net National Income (NNI)?

Answer:

Net National Income (NNI) = Consumptions + Savings + Investment + Net exports – Indirect taxes – Depreciation.

Question: What is Law of Demand?

Answer:

Ø If price of a commodity falls, the quantity demand of it will rise and if the price of commodity rises its quantity demand will decline.

Ø There is a inverse relationship between price & quantity demanded, if other things remain constant.

Question: What is Law of supply?

Answer:

Ø If price of a commodity rises, the quantity supplied of it will increase and if the price of commodity falls its quantity supplied will decrease.

Ø There is a positive relationship between price & quantity supplied, if other things remain constant.

Question: What is Utility ?

Answer:

The satisfaction consumers receive by consuming various goods & services

Question: What is Marginal Utility ?

Answer:

Extra satisfaction enjoyed by consumers from consuming one extra unit of a goods.

Question: Law of diminishing Marginal utility?

Answer:

It states that Marginal utility of any item tends to decline as more of it consumed over a given period.

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