Economics

Economics is a social science concerned with the production, distribution, and consumption of goods and services. It's comprised of broader macroeconomics and consumer-centric microeconomics.

Frequently Asked Questions
  • Why is economics important?

    As a field of study, economics allows us to better understand economic systems and the human decision making behind them. Due to the existence of resource scarcity, economics is important because it deals with the study of how societies use/distribute scarce resources and how these processes can be accomplished more efficiently. For some economists, the ultimate goal of economic science is to improve the quality of life for people in their everyday lives, as better economic conditions means greater access to necessities like food, housing, and safe drinking water.

  • Who is the father of economics?

    The 18th-century Scottish philosopher and economist Adam Smith is widely considered to be the father of contemporary economics. Smith’s book, An Inquiry into the Nature and Causes of the Wealth of Nations, is often cited as both his most notable contribution to the field of economics and one of the most influential books ever written. Some of his most famous ideas include the concept of gross domestic product (GDP) and the “invisible hand” behind the free market economy.

  • What are macroeconomics and microeconomics?

    Macroeconomics and microeconomics are the two primary branches of economics. Macroeconomics focuses on the big picture side of economics, specifically the decisions made by countries and governments that affect an economy as a whole. Microeconomics, meanwhile, is the study of smaller scale decisions made by people and businesses that affect individual markets. Despite their differences, both branches are interdependent of each other and share many overlapping issues.

  • What are the four basic concepts of economics?

    There are four economics concepts that are key to understanding economic decision making: scarcity, supply and demand, incentives, and costs and benefits. Scarcity refers to the fact that valued resources are limited in quantity. Supply and demand, meanwhile, is the relationship between the price of a good or service and the consumer interest in purchasing it, which, for example, can incentivize producers to increase the supply of goods when demand rises and consumers to limit their consumption of certain goods when supplies are scarce. Lastly, cost and benefit is the dynamic between how much a good or service costs to produce/purchase versus the benefit acquired from doing so.

Key Terms
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What Is Performativity in Economics?
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The Great Gatsby Curve
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Are We Headed for a Hyperinflation?
Positive Economics
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The 8 Best Economics Books of 2022
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What Is Generation Z (Gen Z)?
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What Is Money? Definition, History, Types, and Creation
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Cost-Push Inflation vs. Demand-Pull Inflation: What's the Difference?
Pros and Cons of a Trade Deficit
What Does the Law of Diminishing Marginal Utility Explain?
Understanding the Difference Between Moral Hazard and Adverse Selection
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Current Account Balance Definition: Formula, Components, and Uses
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What Is the Balance of Payments?
What Is the Quantity Theory of Money: Definition and Formula
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Adverse Selection: Definition, How It Works, and The Lemons Problem
Business Cycle: What It Is, How to Measure It, the 4 Phases
Coins
Capital: Definition, How It's Used, Structure, and Types in Business
Close up view of till receipts
Consumer Price Index (CPI)
Deficit
What Is a Deficit?
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What Is an Economist?
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What Are Exports? Definition, Benefits, and Examples
Free Market Definition & Impact on the Economy
Gross Domestic Product (GDP): Formula and How to Use It
Keynesian Economics Theory: Definition and How It's Used
The Law of Supply Explained, With the Curve, Types, and Examples
Law of Supply and Demand in Economics: How It Works
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What You Need to Know About Market Power
Market: What It Means in Economics, Types and Common Features
Medium of Exchange Definition
Milton Friedman
Who Was Milton Friedman?
Mixed Economic System: Characteristics, Examples, Pros & Cons
Monopolistic Competition: Definition, How it Works, Pros and Cons
Multiplier: What It Means in Finance and Economics
What Is Natural Unemployment?
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What Is the Net Exports Formula?
Physical Capital Definition
Price-Takers: What They Are, How They Work
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Government Imposed Quota Can Limit Imports and Exports
GDP increase
What Real Gross Domestic Product (Real GDP) Is, How to Calculate It, vs Nominal
Standard of Living Definition
Adam Smith
Who Was Adam Smith?
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Normative Economics
Economies of Scale or Economics of Scale
Microeconomics vs. Macroeconomics: What’s the Difference?
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What Is a Bureaucracy and How It Works, With Examples
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Creative Destruction Definition
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Derived Demand Definition
Accounting
Dumping
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Externality: What It Means in Economics, With Positive and Negative Examples
Friedrich Hayek
Business Activities Are Unfettered in a Free Enterprise System
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Gini Index Explained and Gini Coefficients Around the World
Human Capital Definition: Types, Examples, and Relationship to the Economy
What Is the Invisible Hand in Economics?
Marginal Revenue Product (MRP)
New York Stock Exchange
Mass Production Definition
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Purchasing Managers' Index (PMI) Defined and How It Works
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Raw Materials Definition and Accounting
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Who Is Robert C. Merton?
What Is Scalability?
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Seasonality
Seigniorage Definition
Page Sources
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  1. Federal Reserve Bank of San Francisco. "Why Do We Need Economists and the Study of Economics?" https://www.frbsf.org/education/publications/doctor-econ/2000/july/economics-economists/

  2. Adam Smith Institute. "About Adam Smith." https://www.adamsmith.org/about-adam-smith

  3. OECD. "Gross Domestic Product (GDP)." https://data.oecd.org/gdp/gross-domestic-product-gdp.htm

  4. U.S. Bureau of Labor Statistics. "Consumer Price Index." https://www.bls.gov/cpi/