What Is Economics?

A society is a political area of collective production, consumption and distribution, and interaction of different agents by means of money. In simple terms, it is described ‘as a socio-economic domain that highlight the practices, discourses, and physical symbols associated with the exchange, production, and utilization of primary resources.’ The scope of a society covers the entire natural world, and each society has its own established norms and social organization. Societies also vary in terms of culture and language. The modern state systems are the most significant feature of a society.

An economy is usually defined as a set of interacting economic systems. These systems may be based on complex interaction processes involving local, national or global organizations, including government, private sector, and even individuals. However, an economy cannot be a single, unified system. The economic structure of an economy varies as it scales and depends on various variables such as technology, values, scale of production and prices of natural resources, location, law and tradition.

Economics is the science of making economic decisions through a careful observation of how people, firms or institutions interact to produce goods, make decisions about what to produce and sell and maintain the existing production and distribution system. The scope of economics is much broader than the strictly theoretical study of production and distribution. Economists try to understand how people, firms or institutions behave so as to determine what kind of economic activity is optimal for the system. This process is called “economics” and is used to examine how households, corporations, governments or other actors in the economy affect the external environment.

One of the major insights provided by economists is that an economy can function in a wide range of possible settings, depending on the type of actors who participate in the system. For example, there are different kinds of market economies and state-market economies. Market economies are characterized by diffuse and flexible factors of production and consumption, low level of external barriers to trade and competitive prices. State-market economies have a centrally planned system of production and distribution along with a high level of efficiency and effective price controls. In a centrally planned market system, there is little room for the emergence of entrepreneurial firms and they have limited potential to expand their operations beyond the national boundaries.

There are different kinds of economic agents. Production agents are producers of a product who determine the price at which it can be sold. Distributors are the ones who receive the income from the sale of the goods. Real economic agents, on the other hand, are those persons who actually create value in the real economy through various forms of physical activities. Real economic agents include employees of production and distribution companies, buyers and producers of durable goods, workers in production and process lines, architects, contractors, inventors, suppliers, landlords and workers in construction, education, health care and other human services.

The study of economics aims to provide general knowledge about how people organize their economic activities and how the distribution of scarce goods and services actually takes place in the real economy. The study of economics helps people understand why the prices of commodities rise and fall and how certain economic problems have been solved by the application of particular techniques. The application of economics also gives people a general understanding of how markets interact and how the various institutional arrangements to ensure that individuals are able to meet the needs of their trading partners.