Economics Definition

Economics Definition:
Economics is the study of how society manages, or allocates, its scarce resources.

Economy comes from the Greek word oikonomos

• Oikonomos: “one who manages a household.”
• Generally, a household has to manage its scarce resources among its members, which takes into account each household member’s abilities, efforts and wants/desires.

A society has to decide what jobs needs be completed and who will complete these jobs.
Consequently, society has to assign people to various jobs and allocate the output of goods and services that they produce. However, because resources are scarce, society has to properly manage the resources.

• What is scarcity?
• In economics, scarcity refers to society’s limited resources. This means that society can’t produce all the goods and services people wish to have.

Economics is divided into two subfields: microeconomics and macroeconomics.

• Microeconomics: the study of how individuals and businesses make decisions and how they interact in markets.
• Microeconomists study decision making by households (individuals) and firms (businesses) and the interaction between these two groups in the marketplace.

• Macroeconomics: the study of the total effects on the national or global economy based on the choices that households, firms and governments make. Topics in macroeconomics include economic growth, unemployment and inflation.
• Macroeconomists essentially study the forces and trends that affect the economy as a whole

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