A Very Simple Introduction to Economics

Economics is a social science.  It deals with the relationship between the production and distribution of goods and services. That relationship is studied by economists who attempt to predict how people will make decisions. It’s also defined as the study of scarcity, the study of how people use resources, and the study of decision-making.

Economics
The reason people buy certain foods at a farmers’ market is a great example of microeconomics

 

Economists typically assume people are rational. That is, they change behavior based on the types of incentives they encounter. Assuming people are rational all the time helps economists form models that predict behavior.

There are two forms of economics. There are microeconomics and macroeconomics.  The main difference between the two is scale.

As you probably inferred,  small-scale economics is called microeconomics. Its focus is on the behavior of individual households and firms when making decisions regarding the allocation of limited resources. Another way to phrase this is to

say that microeconomics is the study of markets.

Macroeconomics could be thought of as the study of the collection of markets. It deals with the issues of growth, inflation, and unemployment. Macroeconomics is the study of economies on the national, regional or global scale.

If you’d like to dive in more, this video does a great job of highlighting the practicality of economics. You can jump to 1:50: