IMPORTANT ECONOMIC TERMS

The entire process of manufacturing, distributing, and consuming a product or service is the basic content of this subject. The study of economics is important as it helps an individual to make a proper decision about allocating the resources for the production of a certain product. Furthermore, it helps to systematically distribute the manufactured products to the customers. Hence the best results can come out with the application of it.

Overview of economics

Economics is a part of social science that generally deals with products or services. Economics helps to determine how a product will be manufactured, distributed, and consumed. In order to manufacture any product, the allocation of proper resources is needed. Economics also helps with that process. Businesses across the world get help from economics to manufacture and distribute products in the best way possible. Assumptions based on the rational behavior of human beings are the basis of economics. This helps to get the most benefits from any production system. Labor and trade are the two main pillars of economics studies. The main objective of economics is to determine the best method among all the implications done by the combination of labor and trade. This entire process ultimately helps a business to grow faster in the industry and generate more revenues.

Generally, economics is broadly classified into two parts, namely macroeconomics and microeconomics. Macroeconomics is focused on the overall behavior of any company, whereas microeconomics aims at an individual or business. However, both parts are mainly concerned with increasing the efficiency level in the production system. This helps the customers to consume the products or services in a better way. Some of the famous economists have stated that labor, materials, and time are the most important things to overcome any scarcity in a production system. The basic idea of economics is based on the unlimited needs that human beings have.

Important economic concepts

In order to achieve anything big, having a basic understanding of the subject only will not help a candidate appear in exams. Furthermore, a subject can have a great impact on human lives also. Such a subject is economics which underpins a lot of ideas having influences on human beings. Economics has its effect on almost every aspect of human lives such as balancing the household budget or learning to drive a car. In short, it can be said that economics explains the process and reason of choices a human makes to fulfill their own needs. Economics is a broad idea, and therefore, to understand every aspect of the subject it has been divided into four key concepts. All these concepts help a human being to make any decision easily and in an efficient manner.

Scarcity

Scarcity generally refers to the limited or scarce resources that the world has to meet the seemingly unlimited wants of human beings. This economic concept helps to allocate resources in the most efficient way so that it meets the needs.

Supply and Demand

Supply and demand are integral parts of any market system. When the demand is more for any product but the supply is less due to the reduced production, it can be charged a higher value by the marketer. On the other hand, when the supply increases, the price generally drops again.

Costs and Benefits

The subject of economics is based on the concept of rational expectations. Costs and benefits have a direct relation with the theory of this concept. People behaving rationally means they are trying to maximize the benefits and minimize the costs in their purchase decisions.

Incentives

The incentive is the most important factor to increase the outcome of any particular system. An incentive is nothing but a reward system that functions as a motivation for people working in any sector. Economic incentives sum up the overall operation of supply and demand from the perspective of producers as well as consumers.

GDP: Gross Domestic Product or GDP denotes the total value of the manufactured products and services of a country in a year.

GNP: Gross National Product or GNP defines the total value of products and services manufactured by the people of a certain country irrespective of the geographic location.

Other such terms include NDP, NNP, Depreciation, REPO Rate, Monetary Policy, and so on.

Conclusion

It has been observed that economics is a vital part of any competitive exam. Candidates invest more focus and time to understand the broad area of economics as it is part of social science. In order to make it easier, it has been divided into several parts. The basic concept of economics is the identification of processes that can fulfill the unlimited wants of human beings. On the other hand, there are some key terms that denote this subject and are important for many competitive exams.