ExcitingNomics - The Fundamentals
There is perhaps nothing more intuitive than the fact that people are more willing to buy at lower prices and less willing at higher prices. Similarly, the fact that people are more willing to provide costly goods & services at high prices and as much at low prices is just as intuitive.
Yet, these simple & intuitive notions serve as the backbone of the market economy and contradict several misconceptions and fallacies in decision making. As such, mastering the fundamentals of economics is all one needs to attain sufficient proficiency.
Supply & Demand is one the most basic tools in economics yet extremely powerful. Understanding the fundamentals will allow us to use these economic tools to make important business decisions by determining and understanding the following:
- Market Equilibrium - Pricepoint of your product
- Elasticity - How sensitive your product is to price
- Consumer Surplus - How much customers stand to gain at different price-points
- Producer Surplus - How much businesses stand to gain at different price-points
- Deadweight Loss - Loss of economic efficiency under certain conditions
- Negative & Positive Externalities - How taxes and other factors affect your business
“An economist is a man who states the obvious in terms of the incomprehensible.”
Alfred A. Knophf