What is 'Economics'

Economics
Economics is the study of scarcity and how it affects the use of resources, the production of goods and services, the growth of production and well-being over time, and many other important and complicated issues that affect society.

What is economics all about?
Economics is the study of how things are made, moved around, and used. It looks at how people, businesses, governments, and countries choose to use their resources. Economics is the study of how people act, based on the idea that people act rationally and try to get the most value or benefit. Economics is the study of how work and business are run. Since there are many ways to use human labour and many ways to get resources, it is the job of economics to figure out which ways produce the best results.

In general, economics can be broken into two parts: macroeconomics, which looks at how the economy works, and microeconomics, which looks at how people and businesses work.

Varieties of Economics
There are two main ways to learn about economics.

A person, a family, a business, a group, or the government can all make decisions independently. Microeconomics looks at different parts of human behaviour to figure out how people react to changes in prices and why they want certain things at certain prices. Microeconomics tries to explain why and how different things have different values, how people make financial decisions, and how they can trade, work together, and cooperate in the best way. Microeconomics looks at how supply and demand change over time and how well things are made, and how much they cost. It also looks at how people divide and share work, set up and run businesses, and deal with uncertainty, risk, and strategic game theory.

Macroeconomics looks at the economy as a whole, both nationally and globally. It does this by simulating the economy with a lot of data and variables from the economy. It could be a certain part of the world, a country, a continent, or the whole world. It mostly looks at how economies grow, change, and go through cycles. Foreign trade, government fiscal and monetary policy, unemployment rates, inflation and interest rates, the growth of total production output as shown by changes in Gross Domestic Product (GDP), and business cycles that cause expansions, booms, and recessions are all looked at.

There is a connection between microeconomics and macroeconomics. The sum of all microeconomic events makes up an aggregate macroeconomic event. But these two areas of economics use very different theories, models, and research methods that can make them seem to go against each other. Many economists study how to put together the basics of microeconomics with macroeconomics into theory and research.

Economic Indicators
Economic indicators show how a country's economy is doing in a specific area. When government agencies or private groups put out these reports regularly, they usually have a big effect on the stock, fixed income, and foreign exchange markets. They can also help investors figure out how the economy will affect markets and make decisions about investments.

Gross national product (GDP)
Many people think that a country's gross domestic product (GDP) is the best way to measure how well its economy is doing. It is the total market value of all finished goods and services made in a country during a certain year or other time period. The Bureau of Economic Analysis (BEA) releases a monthly report at the end of each month. Many investors, analysts, and traders pay attention to the advance GDP report and the preliminary report, which come out a few months before the annual GDP report.

Retail sales
The Department of Commerce (DOC) puts out a report on retail sales in the middle of each month. This report measures the total amount of money made or the dollar value of all products sold in stores.
Using sample data from stores across the country, the report figures out how many products were sold, which is a good indicator of how much money people are spending.

Industrial manufacturing
The Federal Reserve puts out a report every month called "Industrial Production" that shows how the production of U.S. factories, mines, and utilities has changed over time. One of the closely watched variables in this study is the capacity utilisation ratio, which shows how much of the economy's productive capacity is being used instead of sitting idle. A country should see its production values increase and its capacity is used to its fullest.

Employment Data
The Bureau of Labor Statistics (BLS) reports "nonfarm payrolls" every first Friday of the month with information about jobs.
Most of the time, a strong economy means that jobs are being added quickly. In the same way, big drops could mean that contractions are coming. Even though these are broad trends, it is important to look at how the economy is doing.

Changes in prices for consumers (CPI)
The Consumer Price Index (CPI), which the BLS also puts out, is the standard way to measure inflation. It shows how much retail prices (consumer costs) have changed. The CPI compares price changes from month to month and from year to year by putting goods and services from the economy into a basket.

Which kinds of economies are there?
There are four main types of economic systems: traditional, command, mixed, and market.

What kinds of economics are there?
The two main parts of economics are microeconomics and macroeconomics.

What is the most important economic problem right now?
In economics, the main problem is that there are only so many resources and so many wants. Economics has also shown that people can't get everything they want. As time goes on, the more our needs are met, the more we want.

Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.