Economics is the study of this allocation of resources, the choices that are made by economic agents. An economy is a system which attempts to solve this basic economic problem. There are different types of economies; household economy, local economy, national economy and international economy but all economies face the same problem.
The major economic problems are…….
(i) what to produce?
(ii) How to produce?
(iii) When to produce and
(iv) For whom to produce?
Economics is the study of how individuals and societies choose to use the scarce resources that nature and the previous generation have provided. The world’s resources are limited and scarce. The resources which are not scarce are called free goods. Resources which are scarce are called economic goods.
Why Study Economics?
A good grasp of economics is vital for managerial decision making, for designing and understanding public policy, and to appreciate how an economy functions. The students need to know how economics can help us to understand what goes on in the world and how it can be used as a practical tool for decision making. Managers and CEO’s of large corporate bodies, managers of small companies, nonprofit organizations, service centers etc., cannot succeed in business without a clear understanding of how market forces create both opportunities and constraints for business enterprises.
Reasons For Studying Economics Some points are given below;
*It is a study of society and as such is extremely important.
*It trains the mind and enables one to think systematically about the problems of business and wealth.
*From a study of the subject it is possible to predict economic trends with some precision.
*It helps one to choose from various economic alternatives.
Economics can be divided into two broad categories:
1) Macro economics ; Macro economic is the study of the economic system as a whole. It is related to issues such as determination of national income, savings, investment, employment at aggregate levels, tax collection, government expenditure, foreign trade, money supply etc.,
2) Micro economics; Micro economics focuses on the behavior of the individuals, firms and their interaction in markets.