What is Economics Essay - 652 Words

Many people think that economics is about money. Well, to some extent this is true. Economics has a lot to do with money: with how much money people are paid; how much they spend: what it costs to buy various items; how much money firms earn; how much money there is in total in the economy. But despite the large number of areas in which our lives are concerned with money, economics is more than just the study of money. It is concerned with:  · The production of goods and services: how much the economy produces; what particular combination of goods and services; how much each firm produces; what techniques of production they use; how many people they employ.  · The consumption of goods and services: how much the population as a†¦show more content†¦There are three types of resources:  · Human resources: labour The labour force is limited both in number and in skills.  · Natural resources: land and raw materials The world’s land area is limited, as are its raw materials.  · Manufactures resources: capital All inputs into production that have themselves been produced: e.g. factories, machines and tools. One must bear in mind that our wants are virtually unlimited, while the resources available to satisfy these wants are limited. In other words when society demands more of a product than can actually be produced to fulfil those wants we have a problem of scarcity. An example of this would be the OPEC oil price shocks between 1973 and 1980. Yes, it is true that the price of oil rose and some individuals used substitutes but the economies of oil importing countries like Germany and Japan fell because OPEC now had more buying power since they had the control over a scarce resource. We can therefore think of oil as having become scarcer in economic terms when its price rose. Earlier I stated that economics is concerned with consumption and production. We can look at it in the terms of demand and supply. It is simply the quantity of a good buyers wish to purchase at each conceivable price. Three factors determine demand:  · Desire  · Willingness to pay  · Ability to pay Whilst supply is the quantity of good sellers wish to sell at each conceivable price. 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