Tutor profile: Payal S.
What is Economics? Why do we study Economics?
Economics in intertwined in our day to day life. Every decision we take as an individual, consumer or producer is an economic decision. There are various concepts that help us understand the background of this decision making like utility maximization, profit maximization, cost minimization, etc. The main reason to study Economics is scarcity. Human wants are unlimited but the resources we have are limited. Economics is the social science that studies how society chooses to use its limited resources, which have alternate uses, to produce goods and services and to distribute them among different groups of people.
What is Macroeconomics? How does it differ from Microeconomics? Explain the concept of Aggregate Demand and Aggregate Supply briefly.
Macroeconomics is a field of economics that deals with aggregates. While Microeconomics deals with the behavior of an individual unit of an economy, macroeconomics deals with the economy as a whole. For example - When we study how many apples is a consumer willing to buy when the price of apples in the market is Rs. 60, is a concept of microeconomics as it studies individual behavior. Whereas, if we study the similar behavior of all the consumers in the market, that will be a concept of macroeconomics as it studies the aggregate behavior. Aggregate Demand refers to the total value of final goods and services which all the sectors of an economy are planning to buy at a given level of income during a period of one accounting year. Aggregate Supply refers to the money value of final goods and services that all the producers are willing to supply in an economy in a given time period. As these two concepts talk about the economy as a whole, they are macroeconomic concepts.
What is a monopoly? Explain its specific features. Also, briefly explain what do you mean by monopsony?
A monopoly is an imperfect market system where there is a single seller in the market who sells goods that have no close substitutes. He/She has full market power. A monopolistic producer sets the price of the good in the market and thus is said to be a price maker. As he/she is the only producer, they have full liberty to charge different prices from different sets of consumers at a point of time. This is known as 'price discrimination'. Moreover, in a monopoly, there are restrictions to free entry and exit leading to abnormal profits. Monopsony is a market condition wherein there is a single buyer, known as the monopsonist.