The Economics studies Manufacturing, marketing, consumption of goods and services and the behavior of individuals with resources.
In this way, it analyzes the way in which individuals, companies, governments and nations make decisions regarding the allocation of resources to satisfy their wants and needs. Also, it tries to determine how these groups should coordinate their efforts to obtain better results (Wessels, 2000).
The economic analysis usually progresses based on deductive processes, operating in a similar way to the Logical math , Taking into account the framework of human logic (use of means to achieve specific purposes) and their activities.
The economy can be divided into macroeconomics and microeconomics. The first focuses its efforts on studying the behavior of the global economy, while the second analyzes the individual behavior of consumers.
Hesiod Was the first Greek thinker to refer to the economy during the eighth century. For him, it was necessary to use the materials, the labor and the necessary time efficiently to get out of poverty. However, it was in 1776 when Adam Smith Laid the foundations of modern economics.
The main problem facing the economy is that human beings have unlimited demands, but they live in a world of limited resources. For this reason, the concepts of efficiency and productivity are located at the center of economic thought.
By increasing productivity and using resources more efficiently, it is possible to have better standards of living.
Despite its vision, the economy has been called pejorative as a discipline whose study is not interesting (Investopedia, 2017).
The object of study of the economy according to the type
The economy is divided into two broad categories:
Microeconomics
Microeconomics focuses on how individual consumers and producers make decisions. This includes individuals, households, businesses and government organizations.
Microeconomics studies the way in which these individuals trade with each other when prices are affected by supply and demand (Besanko & Braeutigam, 2011).
On the other hand, microeconomics studies the efficiency and costs associated with the production of goods and services, including how labor is used, uncertainty, risk and game theory.
The latter is responsible for defining how an individual's decision-making power will be affected, taking into account all possible external agents and factors that may influence his decisions (Stretton, 2000).
Macroeconomy
Macroeconomics studies the global economy. This includes particular geographic regions, countries, continents and the world at large.
The topics studied by macroeconomics include the fiscal and monetary policies of a government, unemployment rates, growth derived from the Gross Domestic Product (GDP), the business cycles that result in the expansion of the same, the boom, the recession And depression (Barro, 1997).
Within this category there are several schools of thought. The most common are the classical and the Keynesian.
Classical School
This school believes that free markets are the best alternative to allocate available resources, and that the role of governments should be that of a fair and strict arbiter.
Keynesian School
Contrary to classical school thinking, the Keynesian school believes that markets should not be able to allocate resources on their own, and that governments must take action in this matter from time to time to effectively reallocate resources (Dwivedi , 2005).
Fields of study of the economy
1- Work and exchange
The basis of all economic theory is work and exchange. These two concepts are highly versatile, since humans can work in many ways and can acquire resources in different ways.
For this reason, it is difficult to determine what is the best way in which these two concepts can be related to achieve a balance.
The economy shows that it is more efficient for individuals or companies to specialize in specific jobs and then to exchange what is produced by what one wants or needs. All this, instead of producing everything that is needed or wanted in a particular way.
It also shows that the exchange is more efficient when it is coordinated through a means of exchange or money is used (Association, 2017).
2- Incentives and subjective value
By focusing on work, the economy focuses on the action of humans. Most economic models are based on the assumption that humans act according to rational behavior, always looking for ways to reach an optimal level of profit or utility.
However, human behavior is unpredictable, unconscious and is based on personal and subjective values. This means that some economic models proposed by experts are unattainable, impossible and simply do not work in reality.
In this way, the economy seeks to understand the behavior of financial markets, governments and economies, keeping in mind human decisions.
Thus, this discipline has been able to determine the general law of incentives, which indicates that there are elements that may make an individual or organization more inclined to consume a good or compete in a market.
Economic Indicators: object of macroeconomics study
Economic indicators are reports that speak in detail of a country's economic performance in a specific area. These reports are usually published periodically by public agencies or private organizations.
Gross Domestic Product (GDP)
Gross Domestic Product or GDP is considered as the most general indicator of a country's economic performance.
Represents the total value of the goods and services that are available in the market of a country within a certain period of time.
retail
This indicator gives information related to total sales reported by in-store sales.
This value is given in the local currency and estimates the total value sold in goods within a country. This indicator is used to determine the volume of purchase of the consumers within a certain period of time.
Industrial production
The industrial production indicator is a monthly report that provides information on changes in the production volumes of factories, mines and any resource extraction industry.
Employment rate
Each country issues a report that includes employment statistics within its territory. Generally, when the unemployment rate is lower, it is said that a country is more prosperous in economic terms.
References
- Association, A.E. (2017). American Economic Association . Retrieved from What is economics?: aeaweb.org.
- Barro, R.J. (1997). Boston: MIT Press.
- Besanko, D., & Braeutigam, R. (2011). Danver: Wiely.
- Dwivedi, D. N. (2005). Macroeconomics: Theory and Policy. New Delhi: McGraw Hill Offices.
- Investopedia, L. (2017). Investopedia . Retrieved from What is 'Economics': investopedia.com.
- Stretton, H. (2000). Economics: A New Introduction. London: Pluto Press.
- Wessels, W.J. (2000). North Carolina: Barron's.