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Economics is the study of how individuals, companies, and governments choose to allocate resources to meet their needs. The economics helps to decide how to plan and adjust resources to achieve optimal results. It is generally concerned with the design, distribution and use of products and services. Economist formulate economic indicators, such GDP (Gross Domestic Product) and the CPI (Consumer Price Index) which give a overall view of how the nations economy is performing.

Economics is divided into two major sections: macroeconomics and microeconomics. Macroeconomics discuss the behaviour of the whole industry, while microeconomics deals with consumers and industry.

What is Microeconomics?

Microeconomics is the study of decisions in which individuals and firms determine the value of goods and services and the allocation of resources. Microeconomics deals with supply, that determines value of the firm. It utilises bottom-up strategy to deal economy. In other words, microeconomics seeks to understand human choice and the allocation of resources. An important role of microeconomics is to examine which firms can maximise efficiency and reduce costs and become competitive in industry and much microeconomic information can be obtained from financial data.

The main points of microeconomics are:

  • Needs, services and assessments
  • Labor economics
  • Production theory
  • Production cost

Examples: Individual demand, and product’s price.

What is Macroeconomics?

Macroeconomics is a type of economics that paints real pictures. It examines the industry itself on a broad scale and determines various issues in the industry. The problems faced by the economy and the progress it has made have been measured and understood within the framework of macroeconomics. It identifies the advantages and disadvantages of government strategies and limit them in the area. In macroeconomics, it usually focuses on a common concept and how to do it, looking at the organization of a country as a whole as well as the level of work with specific tasks such as rate, cost, interest, income, etc.

The key points of macroeconomics are:

  • Capitalist State
  • Investments
  • Income

Examples: National income and Aggregate demand

Economics in its simplest form began in the Bronze Age (4000-2500 BC) and is documented in four regions of the world. Sumer and Babylon (3500-2500 BC); Indus Valley Civilization (3300-1030 BCE). The regional organization has developed labels describing crops, animals and soil using symbols from clay, papyrus and other materials. These financial procedures, which occur with the written declaration, ultimately include the process of monitoring the exchange of goods, information on expenses and interest rates, calculation of interest rates and other industrial tools still used today.

In the third millennium BC, Egyptian writers were writing about the collection and distribution of land and goods. Sumerian traders developed a way to calculate interest rates for months and years. Early work in the telecommunications industry, Hammurabi’s Law (1810-1750 BC) introduced the business model and provided detailed information about the industry, including conducting business for its member’s investors and traders.

From China the Guanzi’s essay (c. 4th century BC) provided one of the earliest descriptions of materials and application prices. Among the key insights was the assumption that it was money, not the military, that ultimately won the war.

In medieval Western Europe, business theory was often mixed with morality, as found in the writings of Thomas Aquinas (1225-1274) and others. Several authors have described the work of the Tunisian historian and philosopher Ibn Khaldoun (1332-1406). In Al-Muqaddimah, Ibn Khaldun identified economic issues such as the risks of trade, the advantages and disadvantages of the division of labor, and the rise and fall of industrial empires.

Adam Smith, a Scottish scholar and scholar who lived from 1723 to 1790, is considered the founder of modern economics. With these discoveries, Smith developed what became known as classical economics. The core of the business model is that the government’s commitment to the industry allows a blind face to guide everyone’s spending, create the best possible experience for the greatest, and promote industry growth. Smith also studied how marketing works, wealth, and the development of manufacturing. His work has given generations of financial scientist’s ample thought and expansion.

Karl Marx, a German scholar and political scientist who lived from 1818 to 1883, viewed the capital from a negative and more unstable perspective. Marx’s theory is contained in his 1867 book, Das Kapital. Capitalist gains come from hard work, i.e. low wages at personnel costs are effectively created. Consequently, Marx could not accept the idea of ​​a profitable organization.

John Maynard Keynes, an English economist and financial expert who lived from 1883 to 1946, also surveyed the capital and made many recommendations. But they are very different from Karl Marx and Adam Smith in this respect. In 1936, he published the General Theory of Employment, Interest and Money.

The 3 main theories in economics are Marxist Industry, Keynesian Industry and Neoclassical Industry. Some of the other perspectives of economics are institutional economics, monetarism economics and constitutional economics.

Keynes and Macroeconomics

John Maynard Keynes introduced a new line in economics called Keynesian economics, or more specifically macroeconomics. Keynes singled out scientists before they became “classical” economists and supposed that their theory could be applied to choices and products. In the market, they do not describe the operation of the whole industry.

Keynesian macroeconomics presents the market as a large unit that represents unemployment, aggregation needs, or average cost-benefit increases for all products, not marginal units or the market and price of specialized products. Keynesian theory assumes that the government can become a powerful force in the economy and save them from financial crisis through the expansion of monetary policy and fiscal policy which governs government spending, money, taxes and finances designed to run the business.

The Neoclassical Synthesis

By the middle of the 20th century, these two concepts, Keynesian macroeconomics, marginalist and mathematical microeconomics covered almost every point in the Western world. This was known as neoclassical synthesis, which later represented concept of business theory, taught in colleges and practiced by scientists and researchers and other concerns which were considered as heterodox economics.

It refers to Keynesian macroeconomics which incorporates the concept or notion of microeconomics (e.g. expectation of thought) into macroeconomics, or improving microeconomics on a microscopic basis (e.g. value, rigidity or pulmonary stress).

Behavioral Economics

From Smith to Friedman, classic and industrial ideas have built on the idea that consumers are artists in their preferred way. Business attitudes have helped popularize many new concepts that make business design and forecasting more difficult than ever. These concepts include:

  • Lower costs: Continue to invest in projects that have failed due to previous investments.
  • Findings available: Consideration of the result of an action is often due to the fact that it may be more understandable than other results.
  • Restrictions: People know they have more information but do so without complete information.

The economic system is defined as means by which governments or communities plan and distribute products, resources and services in a country or region. The systems governs product resources such as land, capital, operations, and physical usage. A system  involves organizations, associations, a decision-making process, and patterns that shape the business model of a community or country. Different types of economic systems are:

  • Traditional economic system
  • Command economic system
  • Market economic system
  • Mixed system

Economics also has a direct or indirect relationship with many other disciplines. Financial markets studies on the valuation of companies, their assets and their capital structure. Labor economics deals with the decisions and attitudes of employees and the relationships between employers and employees. The history economics studies the history of the region by examining topics such as events after the Industrial Revolution and the emergence of the economy. International economics deals with the relationship between domestic and international matters.

This page was last updated on 17, October, 2022

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Key Points

Macroeconomics studies the behaviour of the country and looks at the nations overall economy. 

Microeconomics focuses on individual people and businesses, studying the consumers and businesses within an industry.

The 3 main theories in economics are Marxist Industry, Keynesian Industry and Neoclassical Industry.

The economic system is by which governments or communities plan and distribute products. Different types of economic systems are:

  • Traditional economic system
  • Command economic system
  • Market economic system
  • Mixed system