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Ceteris paribus is a Latin phrase that means all variables other than the ones being studied are assumed to be constant.Literally, ceteris paribus means “other things being equal.”The demand curve slopes downward because, ceteris paribus, lower prices imply a greater quantity demanded! Ceteris paribus (also spelled caeteris paribus ; ( Modern Latin:  [ˈse.tɛ.ris ˈpa.ri.bus] ) is a Latin phrase, meaning "other things equal"; some other English translations of the phrase are " all other things being equal ", " other things held constant ", " all else unchanged ", and " all else being equal ". A statement about a causal, empirical, or logical relation between two states of affairs is ceteris paribus if it is acknowledged that the statement, although usually accurate in expected conditions, can fail because of, or the relation can be abolished by, intervening factors. A ceteris paribus assumption is often key to scientific inquiry, b...

 ♦A market is a group of buyers and sellers of a particular good or service. ♦The terms supply and demand refer to the behavior of people . . . as they interact with one another in markets. The Market Forces of Supply and Demand: ♦Supply and demand are the two words that economists use most often. ♦Supply and demand are the forces that make market economies work. ♦Modern microeconomics is about supply, demand, and market equilibrium.

 In some modern societies, government plays a big role in answering the three basic questions. In pure command economies, a central authority directly or indirectly sets output targets, incomes, and prices.  A laissez-faire economy is one in which individuals independently pursue their own self-interest, without any central direction or regulation, and ultimately determine all basic economic outcomes.  A market is an institution through which buyers and sellers interact and engage in exchange. Some markets involve simple face-to-face exchange; others involve a complex series of transactions, often over great distances or through electronic means. 6 There are no purely planned economies and no pure laissez faire economies; all economies are mixed.  Individual enterprise, independent choice, and relatively free markets exist in centrally planned economies; and there is significant government involvement in market economies.  Free markets produce what people want, and comp...

  THE CIRCULAR-FLOW MODEL: The circular-flow model is a simple way to visually show the economic transactions that occur between households and Arms in the economy. The circular flow model demonstrates how money moves through society . Money flows from producers to workers as wages and flows back to producers as payment for products. In short, an economy is an endless circular flow of money.  

 PRODUCTION POSSIBILITY FRONTIER (PPF)  A GRAPH THAT SHOWS ALL THE COMBINATIONS OF GOODS AND SERVICES THAT CAN BE PRODUCED IF ALL OF SOCIETY'S RESOURCES ARE USED EFFICIENTLY. The Production Possibilities Frontier (PPF) is a graph that shows all the different combinations of output of two goods that can be produced using available resources and technology . The PPF captures the concepts of scarcity, choice, and tradeoffs.

 ECONOMIC POLICY Four criteria are: 1. Efficiency 2. Equity  3. Growth  4. Stability Efficiency - In economics, allocative efficiency. An efficient economy is one that produces what people want at the least possible cost. Equity- Fairness. Economic growth- An increase in the total output of an economy.  Stability - A condition in which national output is growing steadily, with low inflation and full employment of resources.   Economic growth occurs when society produces more, either by acquiring more resources or by learning to produce more with existing resources. Improved productivity may come from additional capital or from the discovery and application of new, more efficient techniques of production.

  7 Schools of Economic thought(Single sentenced definition):   1. Classical School: The market keeps all producers alert through competition, so leave it alone (invisible hand of market)   2. Marxian School: Capitalism is powerful vehicle for economic progress, but it will collapse, as private property ownership becomes an obstacle to further progress.   3. Neo-Classical School: Individuals know what they are doing, so leave them alone- except when markets malfunction. 4. Institutional School: Individuals are products of their society, even though they may change its rules.  5. Austrian School: No one knows enough, so leave everyone alone.   6. Keynesian School: What is good for individual may not be good for the whole economy. 7. Behaviouralist School: We are not smart enough, so we need to deliberately constrain our own freedom of choice through rules.What are