What is Economics? A Definition of Economics

Ever wonder why food costs rise when gas prices spike? Ever question why U.S. politicians worry when other countries talk of going bankrupt? Ever wonder why you can’t get a good interest rate on your savings account? All of these phenomena can be explained through economics.

Economics is the study of the production and consumption of goods and the transfer of wealth to produce and obtain those goods. Economics explains how people interact within markets to get what they want or accomplish certain goals. Since economics is a driving force of human interaction, studying it often reveals why people and governments behave in particular ways.

There are two main types of economics: macroeconomics and microeconomics. Microeconomics focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, borrowers and lenders. Macroeconomics, on the other hand, takes a much broader view by analyzing the economic activity of an entire country or the international marketplace.

A study of economics can describe all aspects of a country’s economy, such as how a country uses its resources, how much time laborers devote to work and leisure, the outcome of investing in industries or financial products, the effect of taxes on a population, and why businesses succeed or fail.

People who study economics are called economists. Economists seek to answer important questions about how people, industries, and countries can maximize their productivity, create wealth, and maintain financial stability. Because the study of economics encompasses many factors that interact in complex ways, economists have different theories as to how people and governments should behave within markets.

Adam Smith, known as the Father of Economics, established the first modern economic theory, called the Classical School, in 1776. Smith believed that people who acted in their own self-interest produced goods and wealth that benefited all of society. He believed that governments should not restrict or interfere in markets because they could regulate themselves and, thereby, produce wealth at maximum efficiency. Classical theory forms the basis of capitalism and is still prominent today.

A second theory known as Marxism states that capitalism will eventually fail because factory owners and CEOs exploit labor to generate wealth for themselves. Karl Marx, the theory’s namesake, believed that such exploitation leads to social unrest and class conflict. To ensure social and economic stability, he theorized, laborers should own and control the means of production. While Marxism has been widely rejected in capitalistic societies, its description of capitalism’s flaws remains relevant.

A more recent economic theory, the Keynesian School, describes how governments can act within capitalistic economies to promote economic stability. It calls for reduced taxes and increased government spending when the economy becomes stagnant, and increased taxes and reduced spending when the economy becomes overly active. This theory strongly influences U.S. economic policy today.

As one can see, economics shapes the world. Through economics, people and countries become wealthy. Because buying and selling are activities vital to survival and success, studying economics can help one understand human thought and behavior.

Read more on economics 101.

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{ 591 comments… read them below or add one }

Ndina March 23, 2015 at 11:04 pm

I am trying to understand economics but it is very complicated,

1. When we say “Stock markets allow companies to mobilee capital, investors to park their savings, trading in shares and contribute to a country’s development ” what does it mean? Please explain the statement. 400 words maximum.

2. write a note on currency market.
3. Describe in detail evolution of commodities markets globally
4. write short notes on, forward and future contracts, role of stock market regulator, explain the concept of options

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mohammad yasin dawoodzoy March 29, 2015 at 10:14 am

Economic is the logic of choice. It teaches the art of rational decision-making. Thuse, economics is of significant use in modern business, as decision-making is the core of business, and success in business depends on right decision.

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mlah April 2, 2015 at 4:06 am

positive and normative statemen

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SAZEDUR April 4, 2015 at 9:52 am

Economics is the study of commerce among nations.

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shoq April 7, 2015 at 5:05 am

i wanted to say some people love Economic and some people not i am the one who love or like Economic that what i was going to say thanks you for reading my comment

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pearl spencere April 10, 2015 at 11:30 am

To me economics however concerns with how people manage that scarce resources wisely to achieve the highest possible satisfaction.

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Remjius Miyai April 14, 2015 at 11:52 pm

Economics is the study of how a society naturally or artificially allocates its resource to the general population and the overall effect of that entire process of allocation

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Chidoski April 15, 2015 at 1:19 pm

Economic is defined as a science that studies hu.an behaviours as a relationship between ends and scare means which have alternative use.

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Asraful Islam Ansari April 22, 2015 at 10:35 am

Economics is a science that deals with production and distribution of any products in related to money and its value.

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bilyaminu shuaibu KANO April 23, 2015 at 2:35 pm

Economics is a study of life

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David johnson April 28, 2015 at 10:43 am

To me Economics is the study of humans beings related to it environment which means ends and scarcity

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vivian gifty May 1, 2015 at 4:56 am

from what i study,economics is about choice,the behavior of human as a relationships between ends and scarce means which have alternative uses

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Hassan abubakar May 4, 2015 at 11:55 am

Economics is the study of man nd behavious

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Saidu Ado Anas May 6, 2015 at 7:52 am

Now days: Economics Can be define as a study of human behaviour as a relationship between end and scarce, which means have alternative uses.

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ahmed May 6, 2015 at 10:11 pm

i bileave the economic Economics is the study of the production and consumption of goods and the transfer of wealth to produce and obtain those goods. Economics explains

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bitch May 12, 2015 at 11:25 am

math

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