Economics Concepts and Theories

It implies what goods are to be produced and what not and in which quantities these goods are to be produced.

According to the compensation principle, if the prospective gainers could compensate any prospective losers and leave no one worse off, the other state is to be selected . An example of a compensation principle is the Pareto criterion in which a change in states entails that such compensation is not merely feasible but required.

Scarcity occurs when people want more of something than it is already available. In economics, scarcity forces people to make choices, as everyone cannot have everything. Without scarcity, an economy cannot exist.

It is a body of people that sets and administers public policy and exercises executive, political and sovereign power through customs, institutions and laws within a state.

Aggregate planned expenditure for goods and services in an economy is = C + I + G + (X-M).

Macroeconomics examines economy wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product and price levels.

Firms and households collectively circulate the flow of goods and services.

Income and wealth are linked together.

Aggregate economic analysis is concerned with the issues related to macroeconomic issues, such as, gross domestic product, national income, inflation, etc.

W.W. Rostow is famous for his theory on the stages of economic growth, which is often used in historical analogy methods to forecast the development of a country or industry.

To create the unlimited resources is not possible by any economy in the world,because there are only finite resources. There are only a finite (or limited) number of workers, machines, acres of land and reserves of oil and other natural resources on the earth. Because most of our resources are finite, we cannot produce an unlimited number of different goods and services and by producing more for an ever-increasing population we are in real danger of destroying the natural resources of the planet. This has important consequences for the long-term sustainability of economies throughout the world and potentially huge implications for our living standards and the quality of life.

Inventory theory (often associated with the Economic Order Quantity model) deals with determining the optimal level of inventory to hold to minimize costs.

Inventory theory is used to determine how much to order and when to order to balance holding costs and ordering costs.

W. Fellner propounded the concept of price leadership. Thus, this option is correct..

In economic theory, 'satisficing' behavior (choosing a satisfactory option) is contrasted with 'maximizing' behavior. It aligns with the goal of achieving an 'optimum' outcome within the constraints of bounded rationality.