The word Economics is derived from the Greek word “Oikonomia” meaning household management. It’s a detailed study of various arrangements that mostly includes the production, distribution, and consumption of different goods and services. In other words, we can say economics is a part of social science that covers all the aspects of consumer behavior from production to decision making and can get economics assignment help. Apart from this, it also helps in satisfying human needs up to a maximum level by using a limited number of resources.
Economics is divided into two parts Microeconomics and Macroeconomics which are generally considered as the fundamentals of economics or you can also say whole economics depends on these two subjects.
- Microeconomics: It is a branch of economics that studies human behavior and helps in making decisions regarding the allocation and utilization of resources. It focuses more on firms and individuals and provides us detailed information regarding how individuals and businesses cooperate in the process of the exchange of goods and services.
- Macroeconomics: It is a branch of economics that studies the overall economy dealing with the performance, structure, behavior on a large scale. It stresses more on the economy’s growth and structure considering different factors such as a nation’s income, GDP, taxes, unemployment rates, inflation, growth rate, domestic & international trade, and much more. Macroeconomics measures the economy’s overall performance, factors that drive the economy of a nation, and what measures should be undertaken to improve the economic growth of a nation.
Fundamentals of Economics
Microeconomics and macroeconomics are the two basic fundamental principles that lay the foundation of economics as a subject. However, there are many other aspects that you need to keep in consideration while studying economics. Fundamentals of economics include a lot of things like Nature of economics, Demand and Supply, Scarcity, Cost and Benefit, Inflation, and much more.
I will try to my best explain to you every aspect of economics in detail so that you will get a proper idea about the fundamentals of economics.
- Nature of Economics: Economics is a scientific study of the exchange of resources that uses different methods of the behavior of humans, identifies their needs, and tries to fulfill those needs in a limited number of resources. Talking about the nature of economics, it is further divided into two parts: Economics as a Science and Economics as an art.
- Economics as Science: Studying economics as science helps you to develop an effective relationship between price, supply, demand, and various other economic factors that are responsible for the overall growth of an economy. It also contributes to combining various sections of science such as mathematics, statistics, etc.
- Economics as an Art: Art is considered a practical application of knowledge for achieving particular goals. On the other hand, economics consists of different segments like production, distribution, delivery, consumption, finance, etc, all these segments help in solving complex problems of both consumers and society. Therefore, we can say economics is a combination of both Science and Art having their aspects to solve economic problems
- Demand & Supply: Supply and demand are considered the most important fundamental principles of economics. Demand depicts the relationship between the price of the good and its demand by the consumer depending upon their needs. In simpler words, we can say that demand is the actual quantity of a product that the buyer is willing to purchase at a specific rate. On the other hand, supply depicts the relationship between the price and the available supply of that particular item from the perspective of the consumers. In simpler words, we can say supply is the actual quantity of goods and services that a seller is willing to sell at a specific rate.
- When the price is high, consumer demand decreases. It is called as law of demand.
- When the price is high, the supply from the manufacture’s end will be higher. It is called as law of supply
- Scarcity: Scarcity refers to the basic economic problem. It determines a gap between the limited availability of resources in comparison to the limitless wants. It forces people to make decisions and allocate resources in such a way so that it meets the demand of society to a certain extent. Scarcity also arises when there is a huge demand for a product but its supply is very less in comparison. The principle of Scarcity is considered the of the most important fundamentals of economics.
- Cost-Benefit Analysis: It is a theory of rational choice that forms the basis of economics. Cost-Benefit Analysis is a systematic way most businesses use to analyze their decision-making process. It also helps to compare the costs and benefits of a government policy from the perspective of the consumers or society as a whole. In other words, we can say, it compares the value of different goods and services that people use to increase the ratio of their benefits to costs in their decision-making process.
- Inflation: Inflation refers to a situation where we see arise in the prices of most goods and services of daily use like food, clothing, house, transport, etc. Inflation can also be defined as the rate at which the value of a particular currency continues to fall, which automatically leads to a rise in the prices of daily products. Apart from this, inflation also affects the cost of living, when inflation is high, the cost of living also gets higher, which automatically leads to a decrease in the economic growth of a country. Inflation is a never-ending topic that depends on the economic condition of a particular nation and that is the reason it is considered one of the most important and fundamentals of economics.
These were some of the basic fundamental principles of economics that you need to understand to be a master of economics