Introduction to Economics
Economics studies how societies allocate scarce resources to satisfy unlimited wants. It provides frameworks for understanding production, consumption, trade, and policy that affect every aspect of life and business.
Scarcity and Choice
Scarcity means resources are limited relative to wants. This forces choices and creates opportunity cost (the value of the next best alternative foregone). The Production Possibility Frontier (PPF) illustrates trade-offs and opportunity cost graphically.
Microeconomics vs Macroeconomics
Microeconomics studies individual economic units: consumers, firms, and markets. Macroeconomics studies the economy as a whole: GDP, inflation, unemployment, monetary and fiscal policy. Both perspectives are essential for understanding economic behaviour.
Demand and Supply
Demand: quantity consumers are willing and able to buy at various prices (inverse relationship). Supply: quantity producers are willing to sell (direct relationship). Market equilibrium occurs where demand equals supply, determining price and quantity.
Economic Systems
Market economy: private ownership, price mechanism allocates resources (capitalism). Command economy: government controls production and distribution (socialism/communism). Mixed economy: combines market and government intervention (most modern economies including Nepal).
Role of Government
Government intervenes to correct market failures: public goods, externalities, monopolies, and information asymmetry. Tools include taxation, subsidies, regulation, and public provision. Excessive intervention can cause government failure.
Summary
Economics provides tools for understanding resource allocation, market behaviour, and policy impacts. Scarcity, opportunity cost, demand-supply, and economic systems form the foundation for further economic analysis.