What Are Economics?

What Are Economics?

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

Economics is a social science that deals with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate resources to satisfy their needs and wants. Economics also examines how economic agents interact and how economies work. It uses a mixture of theory and observation to inform economic policy, business strategy, and public decisions.

Related Questions

1. What are the two main branches of economics?

The two main branches of economics are microeconomics and macroeconomics. Microeconomics studies individuals and business decisions, while macroeconomics looks at the decisions of countries and governments.

2. What is the role of scarcity in economics?

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Scarcity, a central concept in economics, means that there is less of a good or service than people want at a zero price. It forces people to make choices about how to use and allocate resources efficiently.

3. How does supply and demand work in economics?

Supply and demand is a fundamental concept of economics. It states that the price of a good or service is determined by the intersection of the quantity supplied by producers and the quantity demanded by consumers. If demand exceeds supply, prices tend to rise. Conversely, if supply exceeds demand, prices tend to fall.

4. What is economic equity?

Economic equity refers to the fairness with which income and wealth are distributed within a society. It’s often tied to concepts of income inequality, fairness, and justice.

5. What is the function of money in economics?

Money serves three basic functions in economics: it’s a medium of exchange, a unit of account, and a store of value. It enables people to trade goods and services indirectly, provides a standard measure of value, and allows people to save seamlessly.