Basic Concepts of Economics – UPSC & SSC Exam Notes | JKSSB Mock Test

📘 1. Basic Concepts of Economics

🔹 What is Economics?

Economics is the social science that studies how individuals, businesses, and governments make choices about allocating scarce resources to satisfy unlimited wants.

🔹 Key Concepts

• Scarcity: Limited availability of resources.
• Opportunity Cost: The next best alternative forgone when a choice is made.
• Utility: Satisfaction gained from consumption of goods or services.
• Wants vs Needs: Wants are unlimited, while needs are essential for survival.
• Goods: Tangible products like food, clothes, etc.
• Services: Intangible products like education, banking, etc.
• Resources (Factors of Production): Land, Labour, Capital, and Entrepreneurship.

🔹 Types of Goods

• Consumer Goods: Directly used by consumers (e.g. bread, pen).
• Capital Goods: Used to produce other goods (e.g. tools, machinery).
• Free Goods: Abundant and not priced (e.g. air).
• Economic Goods: Scarce and priced (e.g. petrol, wheat).

🔹 Branches of Economics

• Microeconomics: Deals with individual units (e.g. households, firms).
• Macroeconomics: Deals with the economy as a whole (e.g. inflation, GDP).

🔹 Central Economic Problems

• What to produce? Decide goods/services to produce.
• How to produce? Choose production methods – labor-intensive or capital-intensive.
• For whom to produce? Distribution among population.

🔹 Economic Activities

• Production: Creation of goods and services.
• Consumption: Using goods and services to satisfy wants.
• Exchange: Buying and selling in markets.
• Distribution: Sharing of income among factors of production.

🔹 Important Definitions

Term	Definition
Economy	An organized system of human activity in a country related to production and consumption.
GDP	Total value of goods and services produced within a country in a year.
Inflation	General rise in prices of goods and services over time.
Recession	Negative economic growth for two consecutive quarters.

🔹 MCQs – Practice Questions

• Q1: Which of the following is not a factor of production?
  👉 A. Money ❌ | B. Land ✅
• Q2: What is the basic problem of economics?
  👉 A. Scarcity of resources ✅
• Q3: Opportunity cost means:
  👉 A. Value of next best alternative ✅

🔹 FAQs – People Also Ask

• Q: What is the difference between micro and macroeconomics?
  A: Micro focuses on individuals/firms; macro on economy-wide issues.
• Q: Why is scarcity important in economics?
  A: Because resources are limited, choices must be made.
• Q: What are economic goods?
  A: Goods that are scarce and have a price.

🖚 Conclusion

Understanding basic economic concepts lays the foundation for deeper topics like GDP, inflation, budget, and policies. Focus on keywords like scarcity, opportunity cost, economic goods and distinguish between micro and macro aspects.