[Economics] What is it?

Basic concept of Economics: What is Economics?

It is important to remember that when I talk about “Economics,” I am not referring to a specialized branch of the social sciences, but yo a general understanding of how we maintain our daily lives with others.

Scarcity and Choice

• The economic issues are rooted in scarcity.
• Scarcity is the economy’s constant base condition. The finite capacity to produce goods and services will always fall short of satisfying everyone’s infinite demand for more.
• Consequently, resources always have alternative uses, making every economic decision a trade-off. The value of this trade-off is called opportunity cost.

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Economic Problems

First, let’s see what questions we would like to answer using the accumulated knowledge of Economics.

• What to produce
• How to produce
• For whom to produce (How to distribute)

You might remember “Supply and Demand” from Economics 101. These two simple concepts – producing and spending, which are among the most common human activities – lead to more complex and debatable topics such as resource allocation, labor, social structures, class conflicts, and morality.

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Resources

• Land: physical land and minerals
• Labor: people
• Capital: machinery and transport
• Entrepreneurship: management (ideas + risks)

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Economic Systems

• Free Market Economy
  • Resources are allocated by supply and demand
• Planned (Command) Economy
  • Resources are allocated by a central institute (government)

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Types of Economics

• Positive vs. Normative
  • Positive Economics
    • An analysis of economic variables
  • Normative Economics
    • Value judgment of economic issues
• Micro vs. Macro
  • Microeconomics
    • Individual decisions of households and companies
    • The demand and supply within a particular market
  • Macroeconomics
    • Analyzes the general issues of the whole, such as inflation, unemployment, business cycles, growth, recession, and international trade.
• Ideological Perspectives
  • Neoclassical Economy
    • Based on the tradition of Adam Smith
    • Price (Supply and Demand), Utility, Profit maximization, Rational actors
  • Marxian Economy
    • Based on the mode of production and ownership
    • All modes of production have built-in contradictions that must be resolved through struggle.
  • World Systems
    • Adapt the inter-regional approach instead of the nation-state point of view