INTRODUCTION TO ECONOMICS

 DEFINITION
Economics is a social science concerned with the production, distribution, and consumption of goods and services. It
studies how individuals, businesses, governments, and nations make choices on allocating resources to satisfy their
wants and needs, and tries to determine how these groups should organize and coordinate efforts to achieve
maximum output.

Economics is the study of how people allocate scarce resources for production, distribution, and consumption, both
individually and collectively.
Microeconomics looks at the behavior of individuals and firms. Macroeconomics looks at regional, national, or global
aggregates.

Economics is especially concerned with efficiency in production and exchange, and uses models and assumptions to
understand how to create incentives and policies that will maximize efficiency.

Economists formulate and publish numerous economic indicators to help study the economy. These can also be very
useful to investors to judge how economic conditions will move markets and to guide investment decisions.

The principle (and problem) of economics is that human beings have unlimited wants and occupy a world of limited
means. For this reason, the concepts of efficiency and productivity are held paramount by economists. Increased
productivity and a more efficient use of resources, they argue, could lead to a higher standard of living.

Types of Economics
Economics study is generally broken down into two categories.

Microeconomics
focuses on how individual consumers and producers make their decisions. This includes a single person, a household,
a business or a governmental organization. Microeconomics ranges from how these individuals trade with one
another to how prices are affected by the supply and demand of goods. Also studied are the efficiency and costs
associated with producing goods and services, how labor is divided and allocated, uncertainty, risk, and strategic
game theory.

Macroeconomics
studies the overall economy. This can include a distinct geographical region, a country, a continent or even the whole
world. Topics studied include government fiscal and monetary policy, unemployment rates, growth as reflected by
changes in the Gross Domestic Product (GDP), and business cycles that result in expansions, booms, recessions, and
depressions.

 SCARCITY

Scarcity refers to the basic economic problem, the gap between limited – that is, scarce – resources and
theoretically limitless wants. This situation requires people to make decisions about how to allocate
resources efficiently, in order to satisfy basic needs and as many additional wants as possible. Any resource
that has a non-zero cost to consume is scarce to some degree, but what matters in practice is relative
scarcity. Scarcity is also referred to as "paucity."

KEY TAKEAWAYS
 Scarcity is when the means to fulfill ends are limited and costly.
 Scarcity is the foundation of the essential problem of economics: the allocation of limited means to
fulfill unlimited wants and needs.
 Even free natural resources can become scarce if costs arise in obtaining or consuming them, or if
consumer demand for previously unwanted resources increases due to changing preferences or
newly discovered uses.