Economics

Economics is a broad field which deals with several complex ideals that all root to the concept of scarcity. Scarcity is a phenomenon which pushes people to make some of the most crucial and critical decisions in their lives. In economics, this claim also holds true, since the core of economics is all about making choices. Without scarcity, it is said that economics cannot exists since scarcity is basically the root of economics core principles. Basically, economics was deemed as the science of dealing the decisions being brought forth by scarcity. Hence, it could also be said that economists are scientists who apply technical methods in dealing with and exploring the ideal of scarcity.

In understanding the basic principles of scarcity, it appears significant to first understand its basic concepts. The first thing people have to understand about economics and its emphasis, the economy, is that it is composed of large organizations such as businesses, households and governments. One major role of economists is to make forecasts on what the decision-making trends of these organizations will be like in the future. And this is what is called, descriptive economics. On the other hand, they can also give some suggestions as to what sound options these organizations have. And this is normative economics. The terms, macroeconomcis and microeconomics basically describe the two different categories of economics that deals with the aggregate and the individual level respectively. These categories basically address the analysis and evaluation of economics processes and operations in two different levels, with corresponding technicalities when it comes to the decision-making process. These two aggregates hold different degrees of technicality and complexity and they deal with two different sizes of organizations. And obviously, macroeconomics deals with the more complex aggregate while microeconomics addresses the more simplistic, individual level.

Aside from the basic concepts, it also appears relevant to understand the troublesome concept in economics so as to understand how to deal with them in the course of this study. One of the most problematic concepts in this field will be selfishness and self interest. Economists define selfishness as a dilemma in economics since it entails almost no concern to the interest of others but to ones own only. Moreover, there also is the constantly misunderstood concept of profit. Most people would see profit as the excess wealth from wealthy businessmen however economists define it, basically, as whatever monetary returns the business acquires. This means that it is not just about wealth and extras. Whatever returns to a businessman after a business operation in the form of money, may it be great or small, it is profit. Apart from these problematic issues, there is also the conflict between want and need. In economics, the supply and demand curve appears to be the mantra and the most fundamental graph being used. Demand is what dictates supply however in identifying this kind of relationchip, a crucial need to differentiate between what people want and what people need rises.

One scenario which best explains this contradiction is when a person wants something, yet cannot demand because of lack of funds. This is very important for economists to predict since this shall dictate what is logical to produce. Among others, these are the most basic problem areas in studying economics.

Going further, it also appears important to understand the possibilities in economics. And one of those learning is to understand the fact that whatever decisions people make every day is an opportunity cost. In this concept is where the production possibilities frontier relies. Basically, this is a graph which identifies several crucial information significant in economics such as  producers and consumers goods as well as costs. And this graph helps in determining what goods are exhaustible, whether or not there are depletion costs, as well as whether or not there is economic growth.

Markets At Work
In economics, it is important to understand how markets work. In this feat, it must be known that markets have varying characteristics that are categorized as either desirable or undesirable. A market having all the desirable characteristics would have to be categorized as perfect. However, economists, themselves say that no market is indeed perfect.

In the process of understanding the complexities of market, the most fundamental thing to do is to return to the market basics. Firstly, it is significant to understand that consumers play the most important role in the success of a market. In studying markets, one important consideration is being kept in mind and this how products meet the expectations of buyers. This is being analyzed through the benefit-cost analysis. Aside from this, it is also important to determine whether a certain market is keeping up with the expected benefits from consumers. Hence, there is the concept of diminishing marginal benefits to explain this. In studying economics, students have to get used to a lot of graphs. But as what was mentioned earlier, the fundamental principles underlying all graphs in economics are the laws of demand and supply. In the law of demand, it is said that consumers tend to have higher benefits when the prices are low. On the other hand, the law of supply suggests that profit tends to rise when the prices are also being lifted. Understanding these basic rules enables students to also have a basic grasp on the more complex elements in economic graphs.

Demand and supply curves are the graphs or illustrations that are commonly being utilized in describing the relationships between producers and consumers. Each graph involves individual rules and considerations. For example, the demand curve is the part of the graph where the producers are more concerned about. This curve dictates how much consumers need a certain kind of product or service. Hence, this curve is where the production is mainly dependent. Basically, all the other more technical and complex ideals in economics depend on the basic curves of supply and demand. First and foremost, these graphs determine the benefit expectations of consumers, which the producers have to meet. Moreover, these two curves also identify whether or not the market stays at equilibrium, at a profitable state or at the losing end. This relationship between demand and supply appears very significant to both the ends of consumers and producers as this dictates how well a market performs and how strong the consumers are demanding for a certain kind of product or service. Basically, this tells the producers whether or not they have to stop their operations, based on their performance being reflected through the profit margin on the graphs.

As what has been mentioned earlier, economists suggest that there is really no perfect market. Basically, a market is responsible in determining the equilibrium point where in the prices, costs, profits and benefits of the consumers are at their most optimal levels. Since there is no perfect market, economists have identified several types of market imperfections and one form of imperfection if tagged, the spillover effect. In this kind of imperfection, a market will appear to affect some external factors in the production in a negative way. A good example of this is when pollution comes as an effect in producing a certain kind of product. Although some objectives in production is met, the effect incontestably poses effects to the consumers in various aspects, such as health and well being. The demand and supply curve are able to identify internal forces in distribution and production such as the demand, benefits and concerns however, external forces such as influences of pollution are not addressed. Because of this, although producers are able to meet the demands, they experience what is called a market failure.

Supply, Demand, and Prices
Supply, demand and prices are three of the most fundamental concepts in economics. Understanding these ideals shall also correspond understanding some complex relationships involved in market operations.

Firstly, there is the concept of stocks versus flows. Flow is basically the amount of product of services being supplied from the producer. Stock on the other hand is amount of goods or services which is being kept and regulated for a certain period of time in order suffice in times of scarcity in supply. Loosening up in terms of regulation may affect production however, this will not in any way affect supply. This is important to understand in order to do well in market adjustments involving stocks and supply flows.

Apart from this, one of the most basic understandings required in economics is on market equilibrium. As what has been mentioned earlier, market equilibrium defines a point in the supply and demand curve which corresponds to the optimal range or supply, demand and price. This point also presents the real situation of a products relative scarcity at present. Quite obviously, the reason why it is important to understand market equilibrium is because it defines the win-win situation for both the producers and consumers. Moreover, it defines the surplus, the shortage and whether a firm is actually at the profitable or at the losing end.

In relation to understanding the market equilibrium, one of the most basic processes in economics is determining the equilibrium price. In order to do this, it is first important to know that other prices can yield either a product surplus or shortage. To make things more comprehensive, consider the figure below

This figure presents a situation where P (the current price) is on top of Pe. With this, there will be an observable excess in supply, represented by Qs  Qd. Since firms cannot produce products that do not actually sell, they will not be left with any other choice but to decrease the price in order to generate sales. This is basically how adjustments in this kind of situation go. And basically, this justifies why the equilibrium price (Pe) is at the most optimum point of supply and demand.

However, in dealing with this complex ideal of supply, demand and price, a lot of ethical issues usually arise. One of such issues deals with greed and unfairness when it comes to pricing. Over the years, the consumers have grown sensitive and vigilant enough in scrutinizing how companies price their products and services. A lot of issues regarding unjust and unreasonable pricing have already rose, that made people more communicative of their sentiments regarding price and benefit satisfaction. This is basically the reason why economics and legislations came up with ideals like price floors and price ceilings. These are the upper and lower boundaries set by federal legislations in line with their goal of controlling the pricing of companies, which eventually aids in avoiding unreasonable pricing.