Basic Concept of Economics and Overview
In this post, users may understand the basic concept of economics and would be able to attempt the basic economics questions in the exams as well as the daily life economic changes in demand and supply. Lets study.
Definition of Economics
According to Lionel Robbins, from the Concise Encyclopedia of Economics, he stated that “Economics is the study of given ends and scarce means.”
Economics is the study of scarcity and its involvement in the utilization of resources, production of goods and services, growth of production, and a large variety of other difficult issues essential to society.
Father of Economics
Adam Smith, a Scottish economist, philosopher, and author is considered the father of modern economics.
Understanding the Basic Concept of Economics
Economics plays a role in our everyday life. Economics is the study of how scarcity is to be challenged by the people. It can be business decisions, family decisions, individual decisions, or any other. If you investigate meticulously, you will find that scarcity is a fact of life. First, you should know what actually scarcity means; it means human wants for goods, services and resources surpass what is available. On the other hand, you should know what resources mean, it means land, raw materials, tools, and labor are basic to produce the goods and services we want but they subsist in some degree of supply. Naturally, the endeavors to acquire the goods by the rich or poor, in just 24 hours in the day. So there are very limited resources available at any point in time.
Basic Concept of Scarcity Problem in Economics
Listen and read carefully, you consume anything like you eat food, you live in home, shelter, you wear clothes, you use the transportation system, healthcare, entertainment, and other many items. Now the question arises here, how do you get those items? Do you produce them all yourself? No. Actually, you purchase those items. you need money for purchasing those items, so how do you afford those items you purchase? You need to work somewhere for pay. Or if you do not work, someone else does on your behalf. Now despite most of us never have enough money to purchase all the items or things, and services we need. This is all because of scarcity. So how do we solve it?
Every person must make choices that how to utilize its resources. Families must make a decision whether to spend their money on a new iPhone or an on a tour. Towns must prefer whether to put more of the budget into the construction of roads or into the Hospitals system. Nations must make your mind up whether to devote more funds to the military or to politics etc.
The principle of economics is that there have been unlimited wants but limited resources in the world. Therefore, the concepts of productivity and efficiency are held dominant by economists. Better output and proficient use of resources could lead to a higher standard of living.
Basic Concept of Demand and Supply in Economics
So, economics is the game of balancing demand and supply. How? It is because when we (people) make the choice to purchase excessive Death Wish Coffee products, then it means demand for this product has been increased. Consequently, that company will increase the price of that product. And if demand increases, the company would produce more Death Wish Cofee product for Us (People), it means to supply for Death Wish Cofee would be increased. So, here is a point to understand the basic concept of economics. In the end, the supply of Death Wish Cofee will increase enormously that lead to decrease prices of the product. So, the price of that product will be reduced from normal (original price before increasing demand) to the extreme. As a result, its value would be decreased.
Types of Economics
The study of economics fall down into two types:
Microeconomics study of choices how individual customers and companies make decisions; these individual decision-making units can be a household, single person, a business, etc. Analyzing such features of human behavior, microeconomics can explain how they react to changes in price and demand.
Macroeconomics is the study of the performance of national and global economies. There is three major concerns of macroeconomics:
- National Output
There are four types of economic systems:
- Market economic system
- Mixed economic system
- Traditional economic system
- Command economic system
Economic indicators are proxies that show a country’s economic performance in a specific area. These reports are usually published periodically by governmental agencies or private organizations. As per those reports economics condition, Investment decision in the business of any country is to be judged. There are various indicators of economics, some are listed below:
- GDP ( Gross Domestic Product)
- CPI (Consumer Price Index)
- Employment Data
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