Economics

Economics is a social science concerned with the production, distribution, and consumption of goods and services. It's comprised of broader macroeconomics and consumer-centric microeconomics.

Frequently Asked Questions
  • Why is economics important?

    As a field of study, economics allows us to better understand economic systems and the human decision making behind them. Due to the existence of resource scarcity, economics is important because it deals with the study of how societies use/distribute scarce resources and how these processes can be accomplished more efficiently. For some economists, the ultimate goal of economic science is to improve the quality of life for people in their everyday lives, as better economic conditions means greater access to necessities like food, housing, and safe drinking water.

  • Who is the father of economics?

    The 18th-century Scottish philosopher and economist Adam Smith is widely considered to be the father of contemporary economics. Smith’s book, An Inquiry into the Nature and Causes of the Wealth of Nations, is often cited as both his most notable contribution to the field of economics and one of the most influential books ever written. Some of his most famous ideas include the concept of gross domestic product (GDP) and the “invisible hand” behind the free market economy.

  • What are macroeconomics and microeconomics?

    Macroeconomics and microeconomics are the two primary branches of economics. Macroeconomics focuses on the big picture side of economics, specifically the decisions made by countries and governments that affect an economy as a whole. Microeconomics, meanwhile, is the study of smaller scale decisions made by people and businesses that affect individual markets. Despite their differences, both branches are interdependent of each other and share many overlapping issues.

  • What are the four basic concepts of economics?

    There are four economics concepts that are key to understanding economic decision making: scarcity, supply and demand, incentives, and costs and benefits. Scarcity refers to the fact that valued resources are limited in quantity. Supply and demand, meanwhile, is the relationship between the price of a good or service and the consumer interest in purchasing it, which, for example, can incentivize producers to increase the supply of goods when demand rises and consumers to limit their consumption of certain goods when supplies are scarce. Lastly, cost and benefit is the dynamic between how much a good or service costs to produce/purchase versus the benefit acquired from doing so.

Key Terms
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The Great Gatsby Curve
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Positive Economics
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What Is Money?
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Cost-Push Inflation vs. Demand-Pull Inflation: What's the Difference?
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What Does the Law of Diminishing Marginal Utility Explain?
Understanding the Difference Between Moral Hazard and Adverse Selection
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Wjat Is the Current Account Balance?
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What Is the Balance of Payments?
What Is the Quantity Theory of Money?
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Adverse Selection
How Is the Business Cycle Measured?
Coins
What Is Capital?
Close up view of till receipts
Consumer Price Index (CPI) Explained: What It Is and How It's Used
Deficit
What Is a Deficit?
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What Is an Economist?
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Learn What Exports Are
Free Market Definition
Gross Domestic Product (GDP): Formula and How to Use It
Keynesian Economics Definition: History & Theory
What Is the Law of Supply?
Law of Supply and Demand in Economics: How It Works
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What You Need to Know About Market Power
What Is a Market in Economics?
Medium of Exchange Definition
Milton Friedman
Who Was Milton Friedman?
Mixed Economic System Definition and Examples
Monopolistic Competition
How Multipliers Impact Economics
What Is Natural Unemployment?
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What Is the Net Exports Formula?
Physical Capital Definition
Price-Takers: What They Are, How They Work
A cargo ship full of shipping containers at a dock
Government Imposed Quota Can Limit Imports and Exports
GDP increase
Real Gross Domestic Product (Real GDP) Definition
Standard of Living Definition
Adam Smith
Who Was Adam Smith?
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Normative Economics
Economies of Scale or Economics of Scale
Microeconomics vs. Macroeconomics: What’s the Difference?
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What Is a Bureaucracy?
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Creative Destruction Definition
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Derived Demand Definition
Accounting
Dumping
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Understanding Externalities
Friedrich Hayek
Business Activities Are Unfettered in a Free Enterprise System
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What Is the Gini Index?
Reading Into Human Capital
What Is the Invisible Hand in Economics?
Marginal Revenue Product (MRP)
New York Stock Exchange
Mass Production Definition
Close-Up Of Stock Market Data On Digital Display
Purchasing Managers' Index (PMI) Definition
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Raw Materials Definition and Accounting
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Who Is Robert C. Merton?
What Is Scalability?
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Seasonality
Seigniorage Definition
Page Sources
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  1. Federal Reserve Bank of San Francisco. "Why Do We Need Economists and the Study of Economics?" https://www.frbsf.org/education/publications/doctor-econ/2000/july/economics-economists/

  2. Adam Smith Institute. "About Adam Smith." https://www.adamsmith.org/about-adam-smith

  3. OECD. "Gross Domestic Product (GDP)." https://data.oecd.org/gdp/gross-domestic-product-gdp.htm

  4. U.S. Bureau of Labor Statistics. "Consumer Price Index." https://www.bls.gov/cpi/