Concepts Of Economics By Jitendra Chitnis

I have recently started studying economics for understanding

concepts that help complete world to nurture and earn their bread
and butter to survive in this small world.

1. Scarcity
2. Demand and Supply
3. Costs and benefits
4. Incentives
5. Combinations of above factors
6. Total Money available for Market for Purchase
transactions (Paper and Coin Currency-called M0 ,
Physical money and Checking A/C M1, M2 = M0+M1,
M3 total money in the world including long term
deposits+unaccounted money or money existing in all
forms such as precious metals/jewllery/prec.
stones/diamonds )
7. Hidden costs or Unknown sources affecting economics
(War, Infation, Corruption, Natural Disasters
Tsunami/Earthquake, Pollution, Black Money, Wrong
Govt. Policies amounting to losses, Increasing costs of
Political elections/rallies/meetings)
8. Unnecessary Purchase/Wastage of
Food/Resources/Currency
9. Waste of money in terms of mobile
talktime/entertainment/electricity/water/star rated
hotels/hospitals and all resources wasted to maintain
the star grade when the hotels/hospitals do not have
that much business.
10. Production affecting factors (Over
production/Under production) Rains/Water/Raw
Material/Increasing taxes/Money required to run
government machinery other than taxes.
11. Combination of policies of different countries
altogether to take final shape of world market when
we think of the world as global village.
12. Issues arising out of War threatening situation/
Terrorism/ Internal Wars /Economical Instability /
World Bank and UN policies / VETO Decisions)
13. Permutations and Combinations of all above
factors.

A)Scarcity and Demand & Supply

Scarcity of Rain/Water and Oxygen / Inert gases affects food

grain production. This affects demand / supply ratio of these
grains, accordingly the cost of fruits, vegetables, grains - either
increases or decreases in markets.

If pollution level rises every year it will affect more oxygen and
usable water then cost of crop production and ultimately grains
will keep on increasing undoubtedly. Also the quality of the
produced crop will diminish and go down.

B)Costs and Benefits

Cost is price of the good produced depending on the demand

and current economic condition of the market or that country
with relative position of the global market.

If Costs rise then purchases in market will automatically reach

to lower levels than earlier. This affects total turnover in the
markets thus reduces benefits.

If cost lowers than expected price then possibly purchases may

rise and will fetch more benefits.

This theory is applicable for manmade produced goods also.

Perishable goods need to be transported to the saleable place
or storage place such as godown/warehouse with proper
temperature and protective environment.

Fore casting weather and market needs for at least one year
from present harvesting season is most important to avoid
losses for the farmers, local markets and the country in which
production of such perishable goods takes place.

C)Incentive

Incentives are encouraging factors to boost or increase

business or profits.

Examples Commissions or money in percentage format or

decided per piece/measurement. This can also be in the form of
other benefits such as free housing/Vehicle/Transport/Food
Coupons/Credits/Shareholding/ Partnership and so on.

This concept is more applicable for bulk business and large

profits or a certain volume of the business.

Combination of Above factors

The offer to work with orgnisation/Company/Owner can be

made in combination of above factors (Salary/Incentives) or
combination of above factors will ultimately decide cost price of
the product.

Total Money Avaialable

The total money available in the market is equivalent to the

currency and coins and checked accounts.

The concept of M0, M1,M2 and M3 is already explained above.

Hidden Costs

Hidden costs are the costs which cannot be accounted prior to

the actual availability of product as some unpredictable factors
that get included.

(War, Infation, Corruption, Natural Disasters

Tsunami/Earthquake, Pollution, Black Money, Wrong Govt.
Policies amounting to losses, Increasing costs of Political
elections/rallies/meetings)

Wrong Govt. Policies - Such as Import or export of certain

products with leviable import or export duty or taxes
applicable.

Unnecessary Purchase/Wastage of
Food/Resources/Currency

Purchases which we waste due to not fully using it or sometime

not using it at all. Kids/Adults waste food due to overeating and
not consuming complete food in parties/rallies/corporate
meetings/hotel food orders.

Waste of resources Some people have more than two houses.

One which they use as residential actual using house other at
native place where parents or brother/sister s family live and
other house or houses for investment or just because they
have more money. Many people have more than two cars.
Many people have investments and chain of companies or
restaurants which fetch money more than thousands family or
million families can survive on for years together.

Waste of Currency Some people throw currency/coins in

rivers/fountains or temples/deities where they lie in for years
 unused for any purpose. Some greedy people store them in
wareshouses/godowns.

Mobile talktime wastage

Youngsters and Kids waste mobile talktime by chatting

meaningless and unnecessary talk.

Similarly electricity and water is wasted in many houses due to

bad habits like keeping television, fan, air conditioners, taps,
showers in on condition when not in use.

Production affecting factors

Rains/Water affect production of crop every year either due to

insufficient or some times more rain water.

Raw Material- Less or Costly raw material hampers total

production in one financial year.

Money required to run government other than taxes

Government take loan from World bank or other countries for
government projects which needs to be repaid. If such projects
gets delayed cost of project goes on increasing and interest on
the loan amount also increases.

Combination of policies of different countries altogether to

take final shape of world market when we think of the
world as global village.
Every country differ their policy for doing national and
international business. Which will differ in taxes, duties and terms
conditions.

Issues arising out of War threatening situation/ Terrorism/

Internal Wars /Economical Instability / World Bank and UN
policies / VETO Decisions)
Such conditions may arise in one or more countries at times and
thus affect regular day today life.

Permutations and Combinations of all above factors.

Some countries may have foods, some may have draughts

some may get affected by wars and some may get favourable
conditions to grow crop or manmade productions. It will differ
from time to time and geographical conditions depending on.