Economics Essay

As we known, economics is one of the youngest sciences to man in the world. Economics is, like sociology, law and politics, a study of one aspect of human behavior. People has their own perspective on what is economics, for instance, some may say Economics is about money or wealth distribution; some may say it has to do with business, profit and loss. Economics is a quite confusing word to most of people. Mises said “Economics . . . is the theory of all human action, the general science of the immutable categories of action and of their operation under all thinkable special conditions under which man acts” (Human Action). Economics explains how people interact within markets to get what they want or accomplish certain goals. Economics is also naturally defined as a study of the use of society’s resources, because society’s resources are scarce. In other word, Economics is about managing the relationship between people and scarce resources. In most societies, people want everything if they can, but each individual in a society cannot attain the highest standard of living to which he or she might desire. Therefore, in order to match the gap between people’s needs and the shortage of resources, people have to make choices to know how to use those resources, and those choices are exactly what Economics is studying.

According to the scale that it is focusing on, Economics is divided into two aspects: Microeconomics and Macroeconomics. Generally, Microeconomics mainly deals with issues about how individuals make their decisions, while macroeconomics is centering aggregate outcomes.

In the field of Economics, the existence of market is fundamental, otherwise, there would be no demand and supply. Because of the scarce resources, people need to trade-offs. For example, people who has A but desiring B has to exchange A for B with people who has B. And after this, people who originally has A now gets B as well. In this scenario, market is the place where people are expected to exchange their items. The need of requiring B is the demand, as for the behavior that person who has B and willing do the interchange is the supply. In a perfect competition market, demand and supply can always reach an equilibrium point. At that point, the price is acceptable for both consumers and suppliers, while the quantity is well balanced by the need and offer. In a perfect competition market, the price is increased by one supplier, for instance, consumers could get goods at the same quality from other suppliers, resulting him declining quantity in selling and eventually dropping his price to the market price. The price goes up due to presumption in production in the whole industry, and then some people may not be able to afford it, so they quit buying it or turn to its substitutions. Therefore, quantity needed by consumers goes down, correspondingly. However, in real world, market does not always self-functioning well, government can improve market outcomes by setting price ceiling and price floor policies to make demand and supply reach at an efficient equilibrium point.