We hope that this has given you some insight to the market and, in turn, your investment strategies. Let's recap what we've learned in this tutorial:
- Economics is best described as the study of humans behaving in response to having only limited resources to fulfill unlimited wants and needs.
- Scarcity refers to the limited resources in an economy. Macroeconomics is the study of the economy as a whole. Microeconomics analyzes the individual people and companies that make up the greater economy.
- The Production Possibility Frontier (PPF) allows us to determine how an economy can allocate its resources in order to achieve optimal output. Knowing this will lead countries to specialize and trade products amongst each other rather than each producing all the products it needs.
- Demand and supply refer to the relationship price has with the quantity consumers demand and the quantity supplied by producers. As price increases, quantity demanded decreases and quantity supplied increases.
- Elasticity tells us how much quantity demanded or supplied changes when there is a change in price. The more the quantity changes, the more elastic the good or service. Products whose quantity supplied or demanded does not change much with a change in price are considered inelastic.
- Utility is the amount of benefit a consumer receives from a given good or service. Economists use utility to determine how an individual can get the most satisfaction out of his or her available resources.
- Market economies are assumed to have many buyers and sellers, high competition and many substitutes. Monopolies characterize industries in which the supplier determines prices and high barriers prevent any competitors from entering the market. Oligopolies are industries with a few interdependent companies. Perfect competition represents an economy with many businesses competing with one another for consumer interest and profits.
InvestingCross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
InsightsElasticity measures the relationship between a good and its price based on consumer demand, consumer income, and its available supply. Learn the basics about it here.
InvestingSupply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
InsightsFind out all about supply and demand and how it relates to your daily purchases.
InsightsThe law of demand is one of the most fundamental principles in microeconomics. It's all about how price affects demand. According to the law of demand, for all other things remaining constant, ...
InsightsThe economy is the production and consumption activities that determine how scarce resources are allocated in an area.
InvestingDemand elasticity is the ultimate measure of how consumer shopping patterns will change with economic conditions.