The Meaning of Economics
What on earth is economics?
Economics is the study of how people choose to use their resources. Resources are things used to produce goods. Capital, labor, and natural resources are examples of resources. Goods are products such as cars or ice cream. Services like those provided by teachers and doctors are also considered goods.
Economics exits because of a thing called scarcity. Scarcity results when people want more of a good than what is available. Without scarcity economics would not exist, and toy would not be reading this blog!
How do people make these choices?
There are three economic atmospheres that determine how people make economic choices. The first is the market system. In a Market Economy factors such as the supply of a good and the demand of that good determine the price of the good. Individuals then make choices which will bring them the greatest monetary gain. For more on supply and demand, see my post Supply and Demand: The Bread and Butter of Economics.
The second economic atmosphere is called a Command Economy. In a Command Economy an authority figure controls prices and how resources are used. Therefore, the authority figure has direct control over price.
The final economic atmosphere is considered to be Mixed. This occurs when an economy has elements from both command and market economies.
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