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ECONOMICS: By Yours Truly,
SimoTheFinlandized- 2022 CE
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Economics is the social science
which studies economic activity:
how people make choices to get
what they want. It has been
defined as "the study of scarcity
and choice" and is basically about
the choices people make. It also
studies what affects the
production, distribution and
consumption of goods and
services in an economy.
Investment and income relate to
economics. The word comes from
Ancient Greek, and relates to
οἶκος oíkos "house" and νόμος
nomos "custom" or "law". The
models used in economics today
were mostly started in the 19th
century. People took ideas from
political economy and added to
them because they wanted to use
an empirical approach similar to
the one used in the natural
sciences. The subjects (actors) in
economic study are households,
business companies, the
government (the state), and
foreign countries. Households
offer their "factors of production"
to companies. This includes work,
land, capital (things like machines
and buildings) and information. In
exchange for their factors of
production, households get
income which they use to
consume (buy) goods from other
subjects. Business companies
produce and sell goods and
services and buy factors of
production from households and
from other companies. The state
or public sector includes
institutions and organisations. The
state takes some of the earnings
from the business companies and
households, and uses it to pay for
"public goods" like streets or
education, to be available for
everyone. The last subject is
foreign countries. This includes all
households, business companies
and state institutions, which are
not based in one's own country.
They demand and supply goods
from abroad. The objects (things
acted upon) in economic study are
consumer goods, capital goods,
and factors of production.
Consumer goods are classified as
"usage goods" (for example,
gasoline or toilet paper), as
"purpose goods" (for example, a
house or bicycle), and as
"services" (for example, the work
of a doctor or cleaning lady).
Capital goods are goods which are
necessary for producing other
goods. Examples of these are
buildings, equipment, and
machines. Factors of production
are work, ground, capital,
information, and environment.
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General Rules:
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All people have to decide
between their options.
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The cost of goods is what a
person gives up for the goods.
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When a person gives up
something (like money) to get a
good, they also give up other
things that they could have gotten
instead. This means that the true
cost of something is what you give
up to get it. This includes money,
and the economic benefits
("utility") that you didn't get
because you can no longer buy
something else.This is called
opportunity cost.
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People choose between options
based on the rewards
("incentives") or bad things
("disincentives") they expect from
each option. Adding to the rewards
for an option will often make more
people choose it.
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Trade can make everyone better
off.
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Markets are usually good for the
organisation of economic life. In
the free market, goods will be
shared by people and companies
making small decisions. The
“invisible hand” of the market
(Adam Smith) states that if
everyone tries to get what they
want, everyone will be as well-off
as they could possibly be.
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Sometimes prices do not fully
show the cost or benefit to society.
For example, air pollution is bad
for society, and education is good
for society. The government can
put a tax (or do something to
reduce sales) on items that are
bad for society. It can also support
(like giving money for) items that
are good for society.
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The living standard of a country
depends on the skills to produce
services and goods. Productivity is
the amount of the produced goods
divided by total working hours.
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When there is an increase in the
total money supply, or when the
cost to produce things rises,
prices go up. This is called
inflation.
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