Definition
• Economics is a social science wherein we study how a producer maximizes his profit, a consumer maximizes his satisfaction and economy as a whole maximizes social welfare.
• Alternatively, economics can also be defined as a science where we study the efficient allocation of scarce resources.
Types
Economics can be studied under the two broad categories- Macroeconomics and Microeconomics. Let’s understand both the categories:
Microeconomics
This branch of economics deals with studying the behavior of an individual or a single firm at a micro level.
Example
Demand and supply concepts, elasticities, externalities, etc. or simply studying the demand curve of one individual constitutes the study of microeconomics.
Importance
It becomes imperative that we study the behavior of one individual at a micro level as these micro-units become the economy at the macro level. Demand pattern and choices of various micro units can help us predict better for the whole economy.
Macroeconomics
This branch of economics involves studying the economy as a whole, dealing with aggregate concepts and not just studying the behavior of one individual.
Example
Inflation rates, prices, aggregate demand, unemployment, etc. are all aggregate concepts of the economy.
Importance
People are slowly realizing the importance of economics. Be it the new policies taken up by the USA or in case of India- Demonetization; the importance of economics as a social science has increased world over. The study of inflation rates affects the policies that a government adopts to tackle the unemployment, poverty, and standard of living. Thus, a subject like macroeconomics becomes extremely important, as the policies that a government adopts affect the lives of all the individuals in the economy.