Most of the people feel
that “Economics” is familiar with them, but it is difficult to define the
subject exactly. There are many different answers about economics, some people
say ‘it is studying of money”, another person answers “It is making business between
profit and loss”, some other people argue “No, it is about how society chooses
to distribute wealth” and some might insist “Wrong, it is describing the
movement of prices in term of mathematical patterns”.
Kirzner points out, in The Economic Point
of view, that there are “a series of formulations of the economic point of
view that are astounding in their variety.” Economics is one of the youngest
sciences that is main reason of this confusion.
lot of scholars provided the beginning realization that economics was a new way
of looking at society. Rather than any other social philosopher, Adam Smith is more
popularized the notation that human beings, left free to pursue their own
goals, and would give rise to a social order without being
had continuously planned. He put it in The Wealth of Nations, free man acts as if “led by an invisible
hand to promote and end which was no part of his intention.
economics has good benefits that can be having a deeper understanding of own
saturation. For example, people usually cannot make proper account for their
choice, however, when people understand that costs are measured in terms of
foregone alternatives, most of them might have a very different view of some
common choices. It is crucial to evaluating questions of policy is one of the other
benefit of understanding of economics. The central concept of economics is the
planned actions of real human beings, and it advantages by analyzing the
thinking used in making those plans.
consumption are economics problems. Scarcity is the central economic problem,
shortage the resources. The resources or factor of productions are labour, land
and raw materials and capital. Demand and supply are importance to be reconciled.
There will be actual and potential demand and supply. For those industries with
labour intensive like agriculture, restaurant and food service, hostility will
need less capital and for those kinds of industries with capital intensive like
oil production, telecommunication will not need much labour.
Two common types of
economics are macroeconomics and microeconomics. Macroeconomics is about the
whole economics issues like growth, unemployment, inflation, balancing of
payments problems and cyclical fluctuations. Microeconomics is for individual
economics. Microeconomic issues are choices between limited and unlimited
resources. For example, what resource will use, labour intensive resource or
capital intensive resource, how to utilize it and those production or services
for whom. The concept of opportunity cost is key concepts in economics that
described the basic relationship scarcity and choice. The rational economic
decision making considered between marginal costs and marginal benefits. If
marginal costs are less than marginal benefits mean that products or services
will do more, but when marginal costs are greater than marginal benefits,
products or services need to reduce and do less. If marginal costs and marginal
benefits are same, it is the best saturation. Microeconomics objectives are
efficiency and equity.
The production possibility
curve shows choice and opportunity cost, increasing opportunity cost in
microeconomic and the production possibility shows production within the curve
and shift in the curve in macroeconomics.
The circular flow of
income considered the size of total flows for macroeconomic issues and it
considered individual markets and choices within goods and factor markets for
microeconomic issues. The circular flow involved firms and households. The
goods markets consist of real flows: good and services, money flow: consumer
expenditure. The factor markets consist of real flows: services of labour and
other factors, money flow: wages and other incomes.
There are generally three
types of economic systems as market economies, command economies and mixed
economies. Market economies are that all productive activities are privately
owned and production is determined by the interaction of supply and demand. In
command economies, government is the one who plans the goods and services that
a country produces, the quantity that is produced, and the prices as which they
are sold. Mixed economies mean there are certain sectors of the economy servicing
under private ownership and free market mechanisms while some other sectors
have significant state ownership and planning.
The advantages of
command economies are high investment, high growth, stable growth and social
goals pursued, and then there is low unemployment. On the other hand, there are
problems of gathering information, expensive to administer, inappropriate incentives
and shortages and surpluses as disadvantages.
In the free market economy,
demand and supply decisions are key factors. As for the price mechanism, there
are shortage and surpluses, equilibrium price and respond to changes in demand
and supply and another fact is the interdependence of markets.
The advantage of free
market economy are transmits information between buyers and sellers, no need
for costly bureaucracy, incentives to be efficient and competitive markets
responsible to consumers. There are problems of a free-market economy also, the
competition may be limited with problem of market power, and there is no equality,
the environment and other social goals may be ignored.