Economics

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DEFINITION of 'Economics'

A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics can generally be broken down into: macroeconomics, which concentrates on the behavior of the aggregate economy; and microeconomics, which focuses on individual consumers.

Economics is often referred to as "the dismal science."

BREAKING DOWN 'Economics'

Two of the major approaches in economics are named the classical and Keynesian approaches. Classical economists believe that markets function very well, will quickly react to any changes in equilibrium and that a "laissez faire" government policy works best.

On the other hand, Keynesian economists believe that markets react very slowly to changes in equilibrium (especial to changes in prices) and that active government intervention is sometimes the best method to get the economy back into equilibrium.

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    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
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    The now-defunct Soviet Union was not a good place for its citizens, who suffered from chronic shortages of consumer goods. ... Read Full Answer >>
  3. What is the difference between variable cost and fixed cost in economics?

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