Guide to Economics & Understanding

 

Guide to Economics & Understanding

News Today :Economics is a social science concerned 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. Economics focuses on the actions of human beings, based on assumptions that humans act with rational behavior.Since there are many possible applications of human labor and many different ways to acquire resources, it is the task of economics to determine which methods yield the best results.

KEY TAKEAWAYS

  • Economics is the study of how people allocate scarce resources for production, distribution, and consumption, both individually and collectively.
  • Two major types of economics are microeconomics, which focuses on the behavior of individual consumers and producers, and macroeconomics, which examine overall economies on a regional, national, or international scale.
  • Economics is especially concerned with efficiency in production and exchange and uses models and assumptions to understand how to create incentives and policies that will maximize efficiency.
  • Economists formulate and publish numerous economic indicators, such as gross domestic product (GDP) and the Consumer Price Index (CPI).
  • Capitalism, socialism, and communism are types of economic systems.

The History of Economics

Economic thought goes as far back as the ancient Greeks and is known to have been an important topic in the ancient Middle East. Today, Scottish thinker Adam Smith is widely credited for creating the field of economics. However, he was inspired by French writers who shared his hatred of mercantilism. In fact, the first methodical study of how economies work was undertaken by these French physiography. Smith took many of their ideas and expanded them into a thesis about how economies should work, as opposed to how they do work.

Economics is generally regarded as a social science, although some critics of the field argue that economics falls short of the definition of a science for a number of reasons, including a lack of testable hypotheses, lack of consensus, and inherent political overtones. Despite these arguments, economics shares the combination of qualitative and quantitative elements common to all social sciences.

KEY TAKEAWAYS

  • Economics is generally regarded as a social science, which revolves around the relationships between individuals and societies.
  • Critics argue that economics is not a science due to a lack of testable hypotheses and ability to achieve consensus.
  • Despite these arguments, economics shares the combination of qualitative and quantitative elements common to all social sciences.

Finance vs. Economics: An Overview

Although they are often taught and presented as separate disciplines, economics and finance are interrelated and inform and influence each other. Investors care about these studies because they also influence the markets to a great degree. It’s important for investors to avoid “either/or” arguments regarding economics and finance; both are important and have valid applications.

As a general social science, the focus of economics is more on the big picture, or general questions about human behavior around the allocation of real resources. The focus of finance is more on the techniques and tools of managing money. Both economic and finance also focus on how companies and investors evaluate risk and return. Historically, economics has been more theoretical and finance more practical, but in the last 20 years, the distinction has become much less pronounced.

KEY TAKEAWAYS

  • Economics and finance are interrelated disciplines that inform each other, even if the specifics are distinct.
  • Finance, as a discipline, is derived from economics; it involves assessing money, banking, credit, investments, and other aspects of the financial systems.
  • Finance can be further broken down into three related but separate categories—public finance, corporate finance, and personal finance.
  • Economics looks at how goods and services are made, distributed, and used, as well as how the economy overall functions, along with the people who drive economic activity.
  • The two main branches of economics are macroeconomics, which looks at the overall economy, and microeconomics, which looks at specific factors within the economy.

Dr.Soumya Mohapatra (Principal)

Aryan School of Business Management 

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