MODULE B: ECONOMIC CONCEPTS RELATED TO BANKING | Fundamentals of Economics, Microeconomics, Macroeconomics, Types of Economies, and Supply & Demand
MODULE B: ECONOMIC CONCEPTS RELATED TO BANKING
Fundamentals of Economics – An Introduction
Economics is the study of how individuals, businesses, and governments allocate scarce resources to satisfy unlimited wants. The two major branches of economics are Microeconomics and Macroeconomics.
Microeconomics
This branch studies individual units such as consumers, firms, and markets. It examines how decisions are made regarding the allocation of limited resources.
Example: How the price of apples affects the quantity demanded by consumers.
Macroeconomics
It focuses on the economy as a whole and studies aggregate indicators like GDP, inflation, unemployment, etc.
Example: Analyzing how a decrease in interest rates impacts national income and employment.
Types of Economies
- Market Economy: Economic decisions are made by individuals and businesses based on supply and demand.
- Command Economy: The government makes all economic decisions and controls resources.
- Mixed Economy: A blend of market and command economies, where both private and public sectors play a role.
Example: India is a mixed economy with government intervention and private enterprise both contributing to economic development.
Supply and Demand
Demand Schedule
The demand schedule shows how much of a product consumers are willing to buy at different prices.
| Price (₹) | Quantity Demanded |
|---|---|
| 100 | 10 |
| 80 | 20 |
| 60 | 30 |
Forces Behind Demand Curve
- Price of the product
- Consumer income
- Tastes and preferences
- Prices of related goods (substitutes or complements)
Shifts in Demand
If income increases, the demand curve shifts to the right. If the price of a substitute falls, the demand for the product may decrease (leftward shift).
Supply Schedule
| Price (₹) | Quantity Supplied |
|---|---|
| 100 | 50 |
| 80 | 30 |
| 60 | 20 |
Forces Behind Supply Curve
- Price of the product
- Cost of production
- Technology
- Government policies
Equilibrium of Supply and Demand
Equilibrium occurs when the quantity demanded equals the quantity supplied at a particular price.
Example: If the demand and supply meet at a price of ₹80, and quantity is 30 units, that's the equilibrium point.
Effect of a Shift in Supply or Demand
A rightward shift in demand increases both price and quantity. A leftward shift in supply (e.g., due to higher input costs) raises prices but reduces output.
Graph Interpretation:
Price and quantity changes can be plotted on a graph with demand and supply curves to show real-time effects of market dynamics.
Interactive Economics Notes with Quiz
Economics is the study of how people use limited resources to satisfy unlimited wants. It includes Microeconomics (individual decision-making units) and Macroeconomics (economy-wide phenomena).
Microeconomics focuses on individual units like consumers or firms.
Macroeconomics deals with large-scale economic factors like GDP, inflation, etc.
- Market Economy: Decisions by consumers and businesses.
- Command Economy: Government controls economic activity.
- Mixed Economy: Combination of both.
Example: India follows a mixed economy model.
Demand: Quantity consumers are willing to buy at various prices.
Supply: Quantity producers are willing to sell at various prices.
Equilibrium: Point where supply = demand.
| Price (₹) | Quantity Demanded | Quantity Supplied |
|---|---|---|
| 100 | 10 | 50 |
| 80 | 20 | 30 |
| 60 | 30 | 20 |
Demand can shift due to income, preferences, or prices of related goods. Supply can shift due to input costs, taxes, and technology.
Example: A rise in petrol prices reduces demand for cars—leftward shift in demand.
| Chapter Number | PAPER I – INDIAN ECONOMY & INDIAN FINANCIAL SYSTEM MODULE B: ECONOMIC CONCEPTS RELATED TO BANKING |
|---|---|
| 1. |
MODULE B: ECONOMIC CONCEPTS RELATED TO BANKING Fundamentals of Economics, Microeconomics, Macroeconomics, Types of Economies, and Supply & Demand |
| 2. | Money Supply and Inflation |
| 3. | Theories of Interest - Explained with Examples |
| 4. | Business Cycles and Economic Policies - Explained with Examples |
| 5. | National Income, GDP and Union Budget - Explained with Examples |
| QandAs/MCQs 8 | MCQs: Economics Fundamentals, Micro and Macro Concepts |
| QandAs/MCQs 9 | MCQs on Money, Money Supply, and Inflation |
| QandAs/MCQs 10 | MCQs on Theories of Interest - IS-LM, Classical & Keynesian Theory |
| QandAs/MCQs 11 | MCQs: Business Cycle, Policies, National Income |
| QandAs/MCQs 12 | MCQs: Monetary & Fiscal Policy | National Income | Union Budget |
| MODULE C: INDIAN FINANCIAL ARCHITECTURE | |
| MODULE D: FINANCIAL PRODUCTS AND SERVICES | |
| MODULE A: INDIAN ECONOMIC ARCHITECTURE | |
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