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Concept of Economics: Economics is the study which deals with the production, distribution, and consumption of goods & services. It also involves the concept of demand and supply of goods and services. Economics studies the behavior of consumers. It involves how the government uses scare resources in an efficient and effective manner to meet the demand of and to satisfy the needs and wants of people.
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Market economy: It refers to the economy in which economic activities are left to free play by the market forces. This type of economy is followed in the US, where the companies decide the prices and they can sell the goods or services at the highest price that consumers are willing to pay. It is also known as a free economy.
Centrally planned economy: It is the type of economy a central authority handles the economic activities. In other words, government runs these economies.
Mixed economy: is the economy that posses the characteristics of both i.e. market economy and a centrally planned economy?
The study of economics composes of two broad categories i.e. microeconomics and macroeconomics. Let’s find out the concept of microeconomics first.
Microeconomics: In simple words microeconomics is the study of home individuals, households and organizations make decisions based on their available resources. This allows economics determine how the overall economic is likely to react in case of surplus resources or shortages. Good and services market can use these decisions to determine influencing factors that can help them make the required changes to retain consumer spending towards the industry.
The central problem of the economy: Majorly there are three central problems of an economy that every economy faces i.e.
What to produce: This is the first and foremost central problem of an economy. In this, the economy has to decide that what they should produce to meet the demand of consumers.
How to produce: It is related to the choice of the technique of production, means which kind of resources to be used to produce the goods and services that should meet the consumer demand.
For whom to produce: This is related to the allocation of resources, means who will be the target consumers for they are producing
The main concepts microeconomics covers are demand, supply, consumer equilibrium, etc.
Demand represents the number of goods and service that a consumer is willing and able to buy on a given range of price.
Supply refers to the number of goods or services that a seller is willing or able to offer for sale at different prices.
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