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Economics is the study of how products and services are produced, distributed and consumed by the consumers. It is the study of how individuals, businesses and governments make decisions to allocate resources. Human behaviour considered as the main centre of Economics as humans act rationally for the highest amount of benefit or value. The study of labour and trade are the basic foundation of economy because there are so many e different ways to acquire resources and use need of human labour, it is the task of Economics to figure out which approach produce the best outcomes.We can classify economics into two categories namely microeconomics and macroeconomics.
Microeconomics is the study of Economics in which we study the behavior of an individual person, firm or an organization whereas in macroeconomics we study the behavior of the economy as a whole.
Basic concepts of economics
The core or basic concepts of Economics include scarcity, supply and demand, cost and benefits, and incentives. Is are really important as they help us to understand human behavior.
Scarcity – scarcity is an important terminology concerned with economics it states the shortage of the goods and services for increasing demand of those goods and services.
Supply and demand – Supply and demand are important components of a microeconomics theory as they help to determine the price of goods and services in an Economy. The price of goods and services may fluctuate until they reach an equilibrium point or when the quantity demanded by consumers is equal to the quantity supplied by consumers.
Costs and benefits
The concept of costs and benefits is linked to the economics theory of rational choice (and reasonable expectations). When economists argue that people act rationally, they mean that they make decisions in order to maximise the benefit-to-cost ratio. The concept of costs and benefits can be used to make a variety of decisions that are not pecuniary in nature. On a daily basis, university students undertake cost-benefit analyses by deciding to focus on certain courses that they believe are more vital for their success. This may include reducing the amount of time they spend studying for courses they deem less important.
Theory of economic growth
There are three main economic growth theories- classical theory, neo-classical theory, new growth theory.
Classical theory
Classical economics is a school of thinking founded by Adam Smith, John Stuart Mill, and other early economists and political theorists. Market economies are, by definition, self-regulating systems governed by the laws of production and exchange, according to classical economics’ core theory. With this foundation, Smith proposed the invisible hand, a metaphorical concept and explanation for free markets based on the idea that individuals acting in their own self-interest generate societal benefits and the public good.
Neo- classical theory
Supply and demand are the driving forces underlying the creation, pricing, and consumption of products and services, according to neoclassical economics. Neo-classical theory appeared around 1900 .The main early assumption of neoclassical economics is that the essential factor for establishing the value of product and service is the use of that product of services for consumers, not the cost of production.
The concepts of Keynesian economics, as well as neoclassical economics theories, underpin modern-day economics. Although the neoclassical approach is the most generally taught economics theory, it is not without its critics.
New growth theory
The new growth idea is an economic concept that asserts that humans’ insatiable ambitions and infinite demands lead to increased productivity and economic progress. It claims that due to people’s desire for profit, real gross domestic product (GDP) per person will continue to rise indefinitely. There are three main types of economic growth theories.
Theories of economic welfare
The study of how the distribution of resources and goods impacts social welfare is known as welfare economics. This is intimately related to the study of economic efficiency and income distribution, as well as how these two elements impact the economy’s general well-being.
A fundamental version of welfare economics is a microeconomic comparison of consumer and producer surplus in marketplaces under various market designs and conditions. “Which market structures and arrangements of economic resources across individuals and productive processes will maximise the sum total utility obtained by all individuals or will maximise the total of consumer and producer surplus across all markets?” is the most basic version of welfare economics. The goal of welfare economics is to find the economic state that will result in the greatest overall level of social satisfaction among its citizens.
Conclusion
Politics, geography, mathematics, sociology, psychology, engineering, law, medicine, and business are all affected by economics, which is a social science. The basic purpose of economics is to discover the most logical and efficient use of resources in order to achieve private and social objectives. Production and employment, investment and savings, health, money and the banking system, government taxation and spending policies, international trade, industrial organisation and regulation, urbanisation, environmental issues, and legal issues (such as the design and enforcement of property rights) are just a few of the issues that the science of economics deals with.
