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.
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.Learn More: How Inflation Affects Your Cost of Living
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.Learn More: Who Was Adam Smith?
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.Learn More: 4 Economic Concepts Consumers Need to Know
Economics is a social science that studies the production, distribution, and consumption of goods and services within an economy. As a field of study, economics is concerned with the economics decisions made by individuals, businesses, governments, and entire nations.
In economics, “capital” refers to assets that are themselves used in the production of goods or for providing services. A broad range of items can be considered capital, including tools and machinery, intellectual property, and financial assets.
Human capital is a concept used in economics to categorize a worker’s experience, skills, health, and personal attributes that are potentially valuable to a business. Human capital is considered an “intangible asset,” meaning it cannot be listed on the assets portion of a company’s balance sheet.
A commodity is a raw material or resource that is considered equivalent with other instances of the same good, regardless of the company producing the items in question. Generally speaking, commodities are things used in the production of other goods or services (e.g., grains, metals, oil, etc.), the quality of which typically differs very little across different producers.
Gross Domestic Product (GDP)
Gross domestic product (GDP) is a measurement of the value created through the goods and services produced in a particular country within a certain time frame. There are several types of GDP (e.g., nominal, real, per capita, etc.), all of which provide slightly different information about a country’s financial health.
Law of Supply and Demand
The law of supply and demand is an economic theory that defines the dynamic between the price of a good or service and a consumer’s willingness to purchase it. The theory posits that, all else being equal, the price of a good tends to increase when supply decreases or demand increases, and vice versa.
In economics, inflation is a measurement of how much the prices of goods and services are rising within a specific economy. Inflation is intended to be reflective of the decreasing purchasing power of a specific currency for a diversified set of products and services.
Consumer Price Index (CPI)
The Consumer Price Index (CPI) is a measurement of the average change in how much consumers have paid for a basket of consumer goods and services within a specific time period. Reported on a monthly basis by the U.S. Bureau of Labor Statistics (BLS), the CPI is one of the most popular tools for measuring inflation.
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/
Adam Smith Institute. "About Adam Smith." https://www.adamsmith.org/about-adam-smith
OECD. "Gross Domestic Product (GDP)." https://data.oecd.org/gdp/gross-domestic-product-gdp.htm
U.S. Bureau of Labor Statistics. "Consumer Price Index." https://www.bls.gov/cpi/