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Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people Goods are scarce but wants are unlimited Given unlimited wants, an economy should make the best use of its limited resources
Efficient Economy
An economy is producing efficiently when it cannot make anyone economically better off without making someone else worse off. The essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way which produce the most efficient use of resources.
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Microeconomics
Adam Smith, a great economist, is the founder of microeconomics This branch is concerned with the behavior of individual entities such as markets, firms, households and even the government. Studies the determinations of prices of land, labor and capital (these three are called factors of production) Inquires about into the strengths and weaknesses of the market mechanism
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Macroeconomics
This is concerned with the overall performance of the economy. Macroeconomics examines variety of areashow total investment and consumption are determined, how central banks manage money and interest rates, what causes financial crisis, why some nations grow rapidly etc.
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Tasks of Economists
Economists use the scientific approach to understand economic lifeobserving economic affairs. Economics relies upon analyses and theories Economists developed a specialized techniquesECONOMETRICS which applies the tools of statistics to economic problems to understand causality of many economic problems
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Command Economies
A Command economy is one in which government makes all important decisions about production and distribution. In short in a command economy government answers the major economic questions through its ownership of resources and its power to enforce decisions.
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Mixed Economies
Mixed Economies with the elements of market and command. That is in this economic system most decisions are made in the market place. But government plays an important role in overseeing the functioning of the market. Most societies today operate mixed economies.
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