Let's talk economics, what is it about?
If you’re like me, there must have been a point in time where you have taken interest in something and thought you knew a lot about it when you did not know as much as you thought you did. No? Well, that was the case for me; I have always admired Economics, but, I did not know much until I started learning in school. At that point, the reality that this field of study is broad became evident. Let us ask ourselves, what is economics about? Why is it important and why do so many people study it? Let us figure these out.
Economics is the study of the allocation and/or distribution of scarce resources, usually within a country, to satisfy the needs and wants of consumers. Interestingly, based on this definition, the derived term “economical’ came about, which means to spend or use resources most efficiently and effectively to limit wastages. Economics is a very inclusive and comprehensive field of study as it, depending on the field of economics focused on, examines various sectors, aspects, and parts of a country’s economy. In examining this further, we need to establish what is meant by an “economy”. Simply put, it is an area in which economic activities occur; economic activities are those that deal with the manufacturing, distributing, or utilizing of goods and services – common among all countries around the world.
With that being said, we now know what economics is. However, that is merely the tip of the iceberg. Economics can be divided into two main branches, macroeconomics, and microeconomics. Macroeconomics is more largescale than its counterpart, as macroeconomics focuses on or is concerned with the entire economy. Conversely, microeconomics is associated with or examines the behaviour of individuals and firms as it relates to making decisions and allocating resources. Therefore, both branches combine to holistically assess the happenings within an economic system. An economic system is another term for an economy, and it can therefore be used interchangeably. Inherently, some economies are different from others depending on their type. There are four main types of economic systems: mixed, market, command (planned), and traditional.
Market economies are predominantly regulated by the consumers with minimalistic government intervention. Resultantly, it mainly follows the laws of supply and demand that are determined by the tendencies of consumers and the response of producers. In stark contrast, a planned economic system is one in which the government exercises dominance and determines and/or controls how resources are allocated. Interestingly, within a mixed economy, both the government or ruling body alongside the consumers are involved with economic activities, thus, it has characteristics of the market and the command economic systems. These economies are more prevalent in the developed western hemisphere as opposed to some parts in the eastern. Lastly, traditional economies are those that have the main economic activities being subsistence farming and other income-generating practices that cater to an individual’s survival.
We have done it! We thoroughly examined the basics of economics that are essential in understanding more complicated and intricate topics as we delve into economics further. Hope you have enjoyed this article and thank you for reading it!