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Economics Fundamentals

Updated: Apr 21


As you have seen in my previous blog, I plan to undertake 15 courses so that I can get end to end understanding for my future readiness. Towards that, the first course I’m taking is economics.

I have enrolled in University of California’s approved high school classes as part of UC Scout Economics Course. I am summarizing different concepts I have learned:

  • What is Economics?: Choices, resources, scarcity and social science

  • TINSTAAFL: There is no such thing as a free lunch

  • Diamond Water paradox.

  • Opportunity costs and Trade-Offs

  • PPC: Production possibilities curve - all resources used, unused resources, when you don't have enough

  • Factors of production: labor, land, capital, entrepreneurs

  • Basic project on salaries, income taxes, savings, expenses

  • 4 types of Economic Systems: Command, Traditional, Mixed and Market economy

  • The 3 questions of Economic Systems {WHO to sell to, WHAT to sell, HOW to sell}

  • 5 characteristics of market economy { limited government, private property, freedom of choice, competition, and the influence of producers and consumers}

  • Common good VS. Public good Vs. Private Good

  • History of economics system evolution in the U.S - started as a free market, but due to the need for the governments to protect workers, social programs, environment, limit corporate power and regulate product safety, the US economy has become a mixed economy with an increased role of the government

  • Circular flow model {explains the generics of how a market economy works }

  • Leakages and Injections {of the model}

  • Consumer and producer roles

  • Types of business/owners {sole proprietorship, partnership, corporations}

  • IPO {initial public offering}

  • Incentives

  • Profit and revenue calculations

  • Adam Smith {author of “Morals and Ethics” and “Wealth of Nations” // father of Capitalism}

  • “The Invisible Hand” {the free market and benefits to society through people’s self interests}

  • “Division of Labor”

  • Supply and Demand curves {indicates in how resources are allocated}

  • Price increase and decrease (leads to customers incentives and how the supply and demand affects the price)

  • Price floor {producer protection given by government}

  • Market disequilibrium {can lead to shortage, when demand > supply}

  • Economic collapse

  • Costs and benefits {government can create taxes on toxic gases, both gain for government profit and company resource usage }

  • Government role since 1960 has decreased

  • Reagan’s beliefs {decreasing taxes = more jobs}

  • U.S environmental protections {Earth Day}

  • U.S national debt (over $1 trillion owed to China and Japan)

  • Fiscal Policy {policy for government expenditures and taxes}

  • Discount rates {intra bank short-term interests bank)

  • Reserve requirement ratio

  • Labor union and labor market

  • Income inequality {discrimination}

  • NAFTA {Free Trade Agreement}

  • GDP (health measurement of the country // evaluation of goods and services of a country)

  • Business Cycle diagram {fluctuations in a nation's aggregate output and employment over time}

    1. Expansion

    2. Peak

    3. Recession

    4. Trough

      • USD Vs. CAD differences

  • Inflation effects

  • Global trade {Selling goods and services to other countries, internationally }

  • Increased Competition{firms aim to sell for low cost so there are more international buyers, thus creating competition within trades}

  • Balance of Payments

  • Trade Surplus (exports>imports)

  • Trade deficit (imports>exports)

  • Free Trade

  • Protection measures {tariffs, quota, subsidies, embargoes}

  • World Trade Organization

  • Economic Growth V.S Economic Developments

This Course has given me fundamental understanding of Economics, Economic Systems, how Businesses are overall managed in an economy, and how both business and economics plays a role in goods and services. There were certain key takeaways from this course that will be lay foundation for my future business plan and related decisions.

Economics is the study of resources and how they are allocated. As a business owner, understanding your current resources and how to make use of it is crucial to a sustainable and affordable business. Once your resources are allocated correctly, it’s important to construct an appropriate business plan involving the mastery of social science. Implying how you should interact with consumers and other business owners to understand a business structure more accurately.

Starting an overall business, is first, to commit to the three questions of the Economic system.

  1. Who to sell to?

  2. What to sell?

  3. How to sell?

These questions will help a business owner identify the bases of their business. Carrying on this topic, knowing the history behind your preferred product will help build assertion in whether this product will sell well on the market or not. This part of the business plan is very similar to understanding the history of your country’s economic system. By comprehending the past mistakes or beneficial actions done by you are now able to know what is more suitable for the economy. Acknowledging the past will succor the future of your business.

Now, having a settled plan, it's critical to include the different marketing strategies your business will utilize in order to attract customers. Incentives are rewards that cause people to take actions, like coupons to attract consumers. Having an incentive for a start up business will attract customers to feel more comfortable spending money at any business, as long as something is being offered back. Although incentives are great for customer attraction, it’s important not to spend too much money on these business appeals, otherwise your business will end up with a loss. This is where Profit and Revenue Calculations play a crucial role.

My overall understanding of the business industry has increased, and after understanding more from the future courses I will be taking, I will be able to conclude with a few product ideas for my business and look forward to creating a strong plan as I progress on this exciting journey..

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