An introduction to economics

YASHAWI BAGGA

INTRODUCTION TO ECONOMICS

WHAT IS ECONOMICS?

Economics is a subject in which people study how human beings work as a society to produce, sell, buy, and use goods (things like food, phones, cars) and services (like haircuts, teaching). It also studies how these goods and services are distributed amongst people. This part basically studies who gets more and who gets less. Economics can be divided into various parts in many ways. The most common way is to divide it into microeconomics and macroeconomics.

Economics is used for many things by governments. It is used to determine how much money to spend on things like education, roads, the military etc. It can be used to understand at what prices the government should sell things like food. It is also used to see how much tax the government needs to raise and how to raise it. However, we must remember that economics only tells people and governments what will happen if they do something. It does not tell them if it is the right thing or not. The government must see what will happen if it does something different and then decide whether it wants it to happen or not. For example, in many countries, governments do not spend enough on education and tax rich people much less, even though economics tells them to, because they are very corrupt.

WHAT IS MICROECONOMICS?

‘Micro’ means small. Microeconomics is the study of how individuals, households, and firms make decisions. A household is simple a collection of individuals who make decisions together. For example, your family is a household. The money you spend on food is taken as a single number, not according to the food eaten by each member of the family. A firm is simply any business- whether it is a small grocery shop or a large international company like Coca-Cola. These decisions include how much of something to buy at a given price, how the amount bought of one good changes with the availability of other goods. It also studies how firms change what they produce when the prices of materials they use change and when people want different things.

Microeconomics also studies how markets work. It sees how much all people in the market want of a good at a price (demand), and how much firms are willing to sell at that price (supply).

WHAT IS MACROECONOMCS?

‘Macro’ means big. Macroeconomics is the study of very large economic ideas, such as the growth of an economy, inflation (increases in prices with time), unemployment, and international trade, and exchange rates. An exchange rate tells us how much of one currency is required to get one unit of another currency. For example, four Ghanain cedi are needed to get one US dollar. Macroeconomics is based upon taking the sum of everything that happens at a smaller level in microeconomics. For example, it takes the behaviour of all consumers for all goods, not just one. Macroeconomics is what governments use to decide what to put in their economic policy.

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YASHAWI BAGGA

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2 Comments

  1. Abdul hakim 6 years ago December 27, 2017

    Well I like economics can u help me understand it

    REPLY
  2. Fahd henry 6 years ago January 1, 2018

    Awesome piece of education

    REPLY

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