Economics a social science explained

What is economics?

Economics is a social science that studies the exchange of goods and services through the production, distribution and end process of consumption. This study focuses on the behavior of economic agents within their particular economies this brings us to the distinction between Microeconomics and Macroeconomics.
Microeconomics as indicated by the word micro, microeconomics study’s the interaction of a section of the economy such as the buyers and sellers and their markets while Macroeconomics involves the study of the entire economic system and factors that affect its functioning such as inflation, fiscal policy and economic growth.

Cost and production in economics

Opportunity cost is the forgoing of an alternative for another and the benefits forgone by choosing to forgo the alternative. For example an individual might chose to buy a car before building a home this means the person will get to enjoy private transport but will continue to pay rent for the house they live in. The opportunity cost in this regard would be the risk taken in forgoing building a home which may earn the individual greater benefits as compared to private transport.

Opportunity cost will ensure resources that are scarce are used more economically during production of goods to improve on economic efficiency since a choice has to be made between two or more alternatives.

Types of economic systems

There are 4 types of economic systems which are determined by the community they operate in. These economic systems are categorized as follows:-

Traditional Economy system- this is an economic system that is community or family based and decisions are made from custom or ritual principles. An example is subsistence economies such as Aborigines.

Market economy system- this is an economic system that relies on consumption and driven by the purchasing power of the community. It fully incorporates the principle of supply and demand and price equilibrium. Example would be in capitalist countries like USA.

Command economy system- this is an economic system which is fully controlled by the government. The government decides what to sell and how much to sell. Example would be in communist countries like Cuba.

Mixed economy system- is an economic system that puts in place some government controls in a Market economy. Example of this type of would be in USA, Japan.

Economic resources

Economic resources are the inputs utilized in the creation of outputs or simply put economic resources are the factors of production. Economic resources include labor, land, entrepreneurship and capital they earn wages, profit, rent and wages respectively.