What is Economics? A Definition of Economics

Ever wonder why food costs rise when gas prices spike? Ever question why U.S. politicians worry when other countries talk of going bankrupt? Ever wonder why you can’t get a good interest rate on your savings account? All of these phenomena can be explained through economics.

Economics is the study of the production and consumption of goods and the transfer of wealth to produce and obtain those goods. Economics explains how people interact within markets to get what they want or accomplish certain goals. Since economics is a driving force of human interaction, studying it often reveals why people and governments behave in particular ways.

There are two main types of economics: macroeconomics and microeconomics. Microeconomics focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, borrowers and lenders. Macroeconomics, on the other hand, takes a much broader view by analyzing the economic activity of an entire country or the international marketplace.

A study of economics can describe all aspects of a country’s economy, such as how a country uses its resources, how much time laborers devote to work and leisure, the outcome of investing in industries or financial products, the effect of taxes on a population, and why businesses succeed or fail.

People who study economics are called economists. Economists seek to answer important questions about how people, industries, and countries can maximize their productivity, create wealth, and maintain financial stability. Because the study of economics encompasses many factors that interact in complex ways, economists have different theories as to how people and governments should behave within markets.

Adam Smith, known as the Father of Economics, established the first modern economic theory, called the Classical School, in 1776. Smith believed that people who acted in their own self-interest produced goods and wealth that benefited all of society. He believed that governments should not restrict or interfere in markets because they could regulate themselves and, thereby, produce wealth at maximum efficiency. Classical theory forms the basis of capitalism and is still prominent today.

A second theory known as Marxism states that capitalism will eventually fail because factory owners and CEOs exploit labor to generate wealth for themselves. Karl Marx, the theory’s namesake, believed that such exploitation leads to social unrest and class conflict. To ensure social and economic stability, he theorized, laborers should own and control the means of production. While Marxism has been widely rejected in capitalistic societies, its description of capitalism’s flaws remains relevant.

A more recent economic theory, the Keynesian School, describes how governments can act within capitalistic economies to promote economic stability. It calls for reduced taxes and increased government spending when the economy becomes stagnant, and increased taxes and reduced spending when the economy becomes overly active. This theory strongly influences U.S. economic policy today.

As one can see, economics shapes the world. Through economics, people and countries become wealthy. Because buying and selling are activities vital to survival and success, studying economics can help one understand human thought and behavior.

Read more on economics 101.

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{ 430 comments… read them below or add one }

oloyede taiwo joseph November 3, 2013 at 12:26 pm

economics is one of the best course in social science,and its very easy to understand only if u are ready to work hard,i love economics

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ikay November 7, 2013 at 1:47 am

awesome Answers . I got All i need on my Research ,,
Keep it Up !

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david ogban mba November 24, 2013 at 1:00 am

economic is good to study cus its expand nd expose people to different kind of life:

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rajesh kumar November 28, 2013 at 1:02 am

economic is a wealth of science

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Dr Tim Osadiya December 2, 2013 at 1:25 am

There has not been any agreed definition of economics because it is a complex and wide subject. Hence, the existing varied definition of economics can be classified under four headings:
1. Wealth definitions (By Adam Smith)
2. Material welfare definitions (Alfred Marshall)
3. Scarcity definitions (Lionel Robbins) and
4. Growth-centered definitions (Professor Samuelson)
In my view, economics can be defined as a social science that studies human rational and irrational behaviours.

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kayode gold December 2, 2013 at 3:38 am

I state economic to be the best course so far bcuz it can not dilapidated

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tokunbo January 4, 2014 at 10:24 pm

What can I do,if I want to be good in economics,please enlight me

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juliet December 3, 2013 at 12:27 am

indeed it is a nice subject which study human behavior
in fact i am in love with that subject

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David V. Garteh December 5, 2013 at 1:33 am

Economics is all about Choice

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Tousif khan December 10, 2013 at 11:30 am

thanks

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Log360 December 11, 2013 at 11:57 pm

U guy are really helping students to learn effectively. Thank u so much

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TAJMAL HUSSAIN SINDHI December 16, 2013 at 7:45 am

I like the economics subject I done master in economics. by Tajmal Hussain Karachi sindh , pakistan.

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sam December 23, 2013 at 2:21 am

its a nice topic
i gained a lot

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Motunrayo January 4, 2014 at 4:56 am

Economic is my best subject, i love to be economist .

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junaid January 11, 2014 at 6:10 am

Economics is the scienc of wealth

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junaid January 11, 2014 at 6:18 am

Adam smith was a father of economics, adam smith Born on 1723
Definition: Economics is a scienc of wealth

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