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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{ 644 comments… read them below or add one }

mesic July 28, 2015 at 10:22 pm

i want to pass economics exam , the web is not really helping
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M. Naeem August 2, 2015 at 11:52 pm

The branch of knowledge concerned with the production, consumption and transfer of wealth….

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Nageshwar kumar August 4, 2015 at 8:09 am

Every person study economics.because economics is a study of human’s earn and spend.

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arshiya August 5, 2015 at 7:39 am

I thought economic only study about money

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Shoaib Malik August 8, 2015 at 2:16 am

Economic is the study of commerce among nation

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Fidelis Atabo August 9, 2015 at 10:01 am

If I may ask, what is the effect of positive or negative human behaviour on economic success. For instance, can the best economic policies thrive on negative human behaviour in a society? .

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imran richie August 10, 2015 at 2:07 am

economics is telling us about people life

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imran richie August 10, 2015 at 2:11 am

economics is teaching us about how life

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indrajeet mishra August 13, 2015 at 4:40 am

economic means a social science which deal with production,consumption,distribution of a country in a specific time period.

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Mamta sachdev August 16, 2015 at 6:59 am

ecomonics is the intersection between the production,consumption,buyer,seller and goverment for the welfare of national.

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Mamta sachdev August 16, 2015 at 7:02 am

economics is the intersection between the production,consumption,buyers,sellers and goverment for the welfare of national.

Reply

muhammed haseeb khan August 17, 2015 at 3:04 am

economics is social science which deal with human body human beehive which show the related good and every human body parched committees for eat and implement that daily three time in day

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muhammed haseeb khan August 17, 2015 at 3:06 am

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.
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James Wele August 17, 2015 at 5:31 pm

Economics is the social science of using scarce resources to meet unlimited wants of people.

Reply

abe kilian August 18, 2015 at 12:21 pm

economics is a sociale science that studies human behavior in relation with scarce, means, earn which have alternative uses

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olawunmi4sure August 19, 2015 at 4:38 pm

economics is not just a subject matter or theory , economics is a social norm that man can’t discard or do without because of its efficiency in restoring financial , political and socio-environmental balance

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