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Macro Vs Micro
!! The two major divisions are Macro and Micro
Economics
Micro Economics
Demand & Supply
!! Supply- Quantity supplied by the industry at !! As the price of good increases demand falls
(consumers do not prefer the good due to high price) and supply increases (manufacturers gets more revenue due to increased price) an upward sloping curve
Elasticity
!! Elasticity is a measure of ratio of percentage change in one
variable to percentage change in other variable response to change in price of the good
!!
elasticity of demand. Similarly there can be elasticity of supply where the numerator is replaced with change in quantity of supply.
Perfect Elasticity
!! The demand is perfectly
elastic at price $15 demand is zero
Perfectly Inelastic
!! This curve represents
perfectly inelastic or zero elastic demand curve demand remains at a particular quantity irrespective of the price level the supply side curve E.G. There can be perfectly inelastic supply curve
Types of Markets
!! There are four different types of markets
!! !! !! !!
Perfectly competitive Monopoly Monopolistic competition Oligopoly
!! All the products produced by different manufacturers !! Prices are determined by demand and supply of the
product, not by the firm demand curve
Monopoly
!! There is one supplier in the entire market who produces
a product which is exclusive and has no good substitutes !! Legal Barriers !! Natural Barriers
production by producing more (Economies of Scale) and they sell at a cheaper price which cannot be done by other players
Monopolistic Competition
!! Large number of competitors produce differentiated
products
product differentiation. Quality is a significant product differentiation characteristic and price is set by the firms based on the demand supply relation enter and exit the business
Oligopolistic Competition
!! The market is characterized by small number of sellers !! There is interdependence amongst the sellers and hence
decision by player is affected by other players decisions
!! Products may be differentiated or similar !! Significant barriers to entry due to which each firm has
large economies of scale. Due to significant barriers of entry there are very few players who supply the entire market hence they have large economies of scale
Macroeconomics
! Total Market value of all final goods and Services produced within an economy ! Check out GDP/NDP/GNP
Inflation
! Rate of changes in price ! Find out the two main indexes for inflation measurement
Interest Rates
! Real interest rate is the rate at which your money grows after accounting for inflation ! Find out the difference between Real and Nominal Interest rates
Budget Basics
!! Revenue Deficit: Revenue Expd Revenue Receipts !! Fiscal Deficit: Total Expd ( Revenue Receipts+
Recovery of loans + Receipts from PSU disinvestment)
Policy Tools
!! Government and RBI uses various tools to influence
the growth of the economy
1.! Control money supply 2.! Control interest rates
Thank You!!!
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