ecomomics for dummies

ecomomics for dummies

Introduction to Economics

1. Basic Economic Concepts

B. As a study of the exchange process, economics has to do with the best use of scarce resources. All societies are faced in varying degrees with the problem of scarcity. This means that their resources are limited. Generally, there are not enough factories in a society to produce all the consumer goods that people want because labor and capital are not typically idle. They are employed in many different ways in their role as resources. Economists are also interested in the improvement of the standard of living of everyone in the society. When an individual or type of business is profit-motivated, resources are more efficiently utilized; that is, they are used in the most productive way.

A. Economics is the study of the activities of human beings seeking to make a living. Specifically, this is the study of the exchange process. When individuals have achieved self-sufficiency, there is no exchange process. There is no need to transact for something that an individual produces but does not want to consume. When people begin to specialize in the production of certain goods or services in order to exchange them for other goods that they want, they will operate on the basis of comparative advantage.

2. Supply and Demand

The natural force that comes to every material in life is explained by the law of supply and demand. If the product, service, or asset is scarce and the demand is high, the price will increase. This is called demand. Conversely, as the asset or service becomes less rare and the demand diminishes, so will its price. The more known is the force’s consequence of the supply and demand; those agents or suppliers lead to prices that are the same inevitably. Energy, like the beat of Earth, existed long before nature was discovered. In human history, a lot of people were published at this time without knowing what they did or why – because this pattern was found to rule everything when it comes to material.

As you read, what are some of the trade-offs that you have to make? Are there benefits you may give up to get something you want? This is a problem everywhere. Groups decide who gets what share out of limited choices. This concept is studied by most individuals and companies. Production is also made by individuals and companies, as well as the political systems of countries such as capitalism and socialism. Economics begins with the concept that everything in the world must be made by considering life, needs, and desires.

3. Market Structures

The opposite of perfect competition is monopoly. Only one seller controls the supply of the product. Because of the absence of other products, the monopoly is expressed in the market. Companies produce heterogeneous goods. This means that the product is of different grades. The company can produce at any cost. Of course, due to patents, technology, and some unfair trade practices. But since there are no replacements for products and services, the monopolist can still carry out unjust practices and obtain maximum profit. Some goods are issued by patent and other products are controlled by a single owner or seller. Once costs are considered, they become barriers. Consumers are required to pay more for the product because competitors are fighting each other. A monopoly is a situation where competitive behavior is not displayed.

Understanding how market structures are used in business may help one understand the logic leading to perfect competition. However, this may be considered unattainable because only one supplier may control a particular commodity or resource. There are several assumptions in this model. The first is that there are many suppliers. The second is that the product sold is identical in quality, size, weight, etc. At the same time, sellers are price takers. The products from several companies are not considered. Also, it means the good is homogeneous or uniform. There are so many companies in the business that the competition is very keen.

4. Macroeconomics

The answers to the big picture questions in the news are all studied in this area called macroeconomics. It’s the job of a macroeconomist to keep track of the overall economy and to make recommendations aimed at solving some of its problems. When we say that a macroeconomist focuses on the economy as a whole, we don’t mean the economics of elephants or the economics of national parks. Rather, we take a step back and look at economic issues at the highest level. For the most part, in this look at the big picture, we assume that people are essentially alike. Individual differences are drowned out by the large numbers of people involved. This allows us to make generalizations about consumers or buyers who act in a particular way.

This section of the Econ Lowdown website looks at macroeconomics. Macroeconomics focuses on the economy as a whole. The study of this subject examines economics at the level of the entire population of individuals or entire companies, rather than that of the singular units making up the whole. Did you ever wonder about the larger picture in a newspaper story? Say the story is about how interest rates may increase. That would affect everything from a new house you want to buy or the car you want to finance. These things affect what people can buy, their home values, and their work. In other words, interest rates could affect our overall economy. Macroeconomics encompasses a variety of concepts and variables. Some of these are gross domestic product, the Consumer Price Index, business cycles, taxes, government spending, inflation, and recession.

5. International Trade and Globalization

Trade between countries raises production and consumption. It lowers prices, making the global economy more efficient. And trade raises income by creating products that change global consumer and business demand within countries. We know that countries with markets open to their neighbors come out ahead, and as a result, there is no reason that the global economy can’t be designed to use gains from trade to make all countries better off. Taken collectively, world citizens may choose policies supporting an open worldwide economy that benefits everyone, emphasizing investments to make everyone more productive. That way, we can choose winners and raise global incomes, all looking forward to a wealthier and more productive global economy. A side benefit of promoting global productivity increases in world markets could be lower unemployment rates, spending, and production during slumps. This is in stark contrast to the current state of the world economy, where unemployment and difficult political consequences of open borders undermine policies to support and raise global incomes.

A powerful effect of globalization is the spread of information through international trade and investment. In a world without globalization, each country’s standard of living would be completely determined by its own production and saving decisions, and by demand from abroad for its products. But we are not in a world without globalization. Instead, if we send goods to other countries, those countries send purchasing power back to us. The return of purchasing power in exchange for output allows citizens of one country to buy what people in other countries are producing. If a country comes out ahead, applying economics to our current globalizing world, a nation’s purchasing power is determined not by how much they produce, but by how their production compares, in global markets, to others.