Economics is one of the branches of social science that is much more than studying tables, making pie charts, and statistics. The word evokes images of trade, finances, stocks, shares, corporate companies, poverty, consumerism, and many other facets of global and national economy.
However, these are just the tip of iceberg when it comes to defining economics. It is a social science that goes beyond the study of money and financial transactions.
An Introduction to Economics
Let us try to grasp the concept of economics by considering a common example from our daily life. When we earn money, we spend it on electricity, food, and several other necessities. An economist tries to analyze and study the various parameters that motivate someone to spend money.
When analyzed for a large geographical or political entity, it is a study of the way national resources are managed and money spent. Economics is an integral part of each and every aspect of life. Right from buying something to starting a business, from saving a penny off income tax to investing in the stock market, it has a deep role to play in everything.
The two broad categorizations of economics are micro-economics and macro-economics.
Macroeconomics studies the economy of a nation by analyzing the total output of a nation. It focuses on how a nation distributes limited resources of land, labor, and capital so that profit can be maximized. It is the study of the society as one entity and how effectively a society is managed by the government.
Microeconomics, on the other hand, takes care of similar issues but from an individual's perspective. It studies how the financial dealings of an individual are related with national earnings and growth. Hence, microeconomics analyzes the market prevailing in a nation and spending habits of individual consumers.
An important concept in the field is Keynesian economics. John Maynard Keynes was a British economist. Along with several other economists, he tried to explain the cause of the Great Depression of 1929. This led to further study of several concepts about macroeconomics.
Keynesian economic models dominated the world in the last century, but are no longer in vogue in the 21st century. Nevertheless, many economic theories have been derived from Keynes' theories.
Economics is mainly the study of how we respond when we have limited resources at our disposal; it is a study of adjusting wants and needs, thereby affecting demand and supply in the market. There is hardly any part of society that is not affected by changes in national and global economy. It is the science of human living indeed.