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Economics

Reviewed by Vishnu | Updated on Oct 05, 2020

Catalogue

Introduction

Economics is defined as the study of production, distribution, and consumption of various goods and services. It studies the decisions made by nations, governments, businesses, and individuals in the allocation of resources to achieve the best return on investment.

Importance of Economics

  1. It helps in coming up with a proper mechanism to counter the exhaustion of raw in times of shortage.
  2. Economists have a divided option on the governments level of intervention in an economy. While some economists believe that government intervention can improve access to public goods, free-market economists wish to have limited government for the same.
  3. One of the main duties of economists is to analyse and understand the reasons for any slump in economic growth, political issues, unemployment and poverty. This can help individuals make a better decision.

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Based on the level of focus, economics can be classified into two categories:

Macroeconomics: The study focuses on the behaviour of an overall economy. Microeconomics: The study concentrates on individual-level business behaviour.

Industry Impact

Based on the level of focus, economics can be classified into two categories:

Macroeconomics: The study focuses on the behaviour of an overall economy.

Microeconomics: The study concentrates on individual-level business behaviour.

Macro-Economics:

  1. The science of macroeconomics is the study of an aggregate economy where its focus can range from the entire world, a continent, a nation, to even a particular region in a country.
  2. The study includes various topics such as the unemployment levels, prevailing interest rates, inflation levels, monetary policies, government regulations and Gross Domestic Product (GDP) performances, among others.

Micro-Economics:

  1. The study of microeconomics concentrates on individual consumers and businesses behaviour of taking decisions. The research focuses on distinct entities such as a government agency, a business firm, a household or a person.
  2. Microeconomics allows us to understand the reason for the change in price and demand of a particular product at a specific time. This is done primarily by tracking behaviour at the individual level, where certain aspects of human behaviour are analysed.
  3. The study also includes various topics such as the efficiency and cost involved in the production of a particular good, supply and demand, allocation of labour, risk involved, uncertainty, and strategic approach at the individual consumer and business level.

Conclusion

Most economists believe that it is the result of the microeconomic actions of individuals and businesses that lead to the phenomena of an overall economy.

Macroeconomics and microeconomics go hand-in-hand according to economists. Understanding the behaviour of the business at both the micro and macro-level can help us make better decisions in the allocation of resources.

Related Terms

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