Economics is based on two facts. The first is that the human need for goods and services is insatiable. The second fact is that there is a scarcity in the resources needed to produce the good and services. It is the role of the economy to decide on the proper allocation of these scarce resources to ensure the satisfaction of the members of the society. Most economic problems are caused by the scarcity of resources.
Economics is divided into two branches – microeconomics and macroeconomics.
The Scope of Microeconomics
This branch of economics studies the economic behavior of a firm, industry or individual in the national economy. It is the study of a particular unit in economics rather than the combination of several financial units. The study of microeconomics encompasses product pricing, consumer behavior, factor pricing, economic condition of a specific sector in society, study of a firm and the location of an industry. Microeconomics is focused mainly on individual businesses and people. It provides an explanation on how a person reacts to decision-making when faced with a choice about spending or investing their money. It also explains the behavior of each firm when competing with one another.
The Scope of Macroeconomics
Macroeconomics studies the economic behavior of large aggregates. It studies the condition of the economy principles of microeconomics gregory mankiw pdf as a whole and this includes total consumption, total production, total investment and total saving. The scope of macroeconomics includes general price level, national income and output, employment and economic growth, external value of money and balance of payments and trades. Macroeconomics studies the economy in its entirety. It looks into various aspects of the economy, such as unemployment, inflation and interest rates. It also delves into the interventions done by the government to help boost the economy. Economic growth is also a part of the study of macroeconomics.
The Importance of Economics
This branch of financial study is very important because it is a part of our daily life. You may not be aware of it, but you are constantly making various economic decisions as you go about your daily routine. When you decide what to eat for dinner, you are unconsciously making one such decision. While choosing from the menu, you weigh out your options. You also put into consideration the amount of money that you are willing to spend for your dinner. If you have a limited budget then you choose a meal that has a lower price even if you want something else on the menu. You sacrifice one benefit for another and that in itself is already an economic decision. Limitations are a part of your daily life. There may be a lot of things that you want to do or buy but you are constrained by your financial capacity. You cannot buy anything that you want if you do not have the money. If you understand the principle of economics, then you will learn how to use the limited resources that you have in the best possible way in order to fulfill all your desires and needs.
If you want to learn more about economics and how you can apply it to your daily life then you can download books online. There are lots of free books on the internet that give one a deeper insight into the subject.