The subject area of economics analyses the behaviour and interactions of people while allocating scarce resources. It ensures the responsible and optimum utilisation of limited resources to maintain an ideal balance in the economy. It keeps a close check on the functions of the entire economy as well.
To properly manage every sector of the economy, there are two subsections of economics, Microeconomics and Macroeconomics. Besides these, other broad distinctions of economics are positive economics (what is), normative economics (what ought to be), economic theory and applied economics, rational economics, and behavioural economics.
The study of economics can be applied in several sectors of the economy like business, health care, finance, engineering, government, and even households.
Economics is the study of the responsible allocation of resources by individuals and higher authorities for future production, distribution, and consumption, both at the micro and macro-level. It primarily focuses on efficiency during production and exchange.
When a person has unlimited wants but limited resources, there must be a definite plan for optimum utilisation of available resources. Here, the economists analyse the decisions made by an individual, business, or economy as a whole and find ways to accommodate unlimited wants with limited resources.
The world of economics revolves around scarcity and choice. Scarcity means when a human's desire or need for goods or services exceeds the actual amount of resources available. On the other hand, their choices in distributing those scarce resources to achieve maximum satisfaction are the essence of economics. Some tools and indicators are used to analyse people's decision-making about scarce resources. The study of economics can be used in almost every industry to balance available resources and the need for them.
Economics is also termed social science, which focuses on the study of production, distribution, industries, consumption of goods and services, government policies, and many other things. Apart from this, Economics has various other natures, and the implementation of it through those views are different from one another.
Economics as a science is associated with the cause and effect relationship, and it also analyses different economic factors before jumping to a conclusion. Here, some other elements of science are added, like statistics and mathematics, to comprehend the relationship between price, supply, demand, and several other elements.
Under this, there are two types of economics.
Positive Economics- It evaluates the relationship between two variable factors but does not make any judgment. It just reflects the actual condition and deals with the facts related to the economy.
Negative Economics- Economics transfer value judgment, i.e., ‘what ought to be.’ This form of normative science is used in policies that are required to achieve these policy goals.
Economics as arts approaches problems practically and provides a unique and creative solution to them. It has several sections to take charge of, like the department of delivery, finance, creation, and consumption. Apart from these, it also takes care of implementing standard rules and regulations that are essential to solving complex societal issues.
Therefore, economics can be recognised as science as well as art. Science shows the methodologies involved in economics, whereas art reflects its application both in professional and practical aspects of the economic problem.
The field of economics is wide, and to study every aspect thoroughly, one must need to break it down into several parts. This whole subject is broadly divided into three main parts, Microeconomics, Macroeconomics, and Econometrics.
Each of these types has its way of observing and handling the stability of human wants and needs. From hereon, we will get deep into these sections of economics separately to understand the essence and importance of economics in an economy.
This branch of economics deals with the choices an individual, household, or firm makes regarding the allocation of resources. Microeconomics studies the various factors involved in selecting scarce resources and the effect of those decisions on the economy. It scrutinises the factors influencing people while choosing a resource that meets their needs. Subsequently, it also inspects the effect those decisions have caused in the market or economy by deflecting the price, supply, and demand.
In a nutshell, microeconomics deals with the supply and demand of various markets. It analyses and demonstrates the relationship households and businesses share and their interaction's impact. Several economic activities go between a household and business, like purchasing household goods and services, selling own resources by individuals, and many others.
The primary focus of microeconomics is on the variables that affect individual economic decisions, their impact on each decision-maker, and how demand and prices are established in specific markets. It analyses the market process that eventually sets the prices for goods and services in the market for all. In brief, it demonstrates the circumstances under which open markets finally result in favourable distributions. Moreover, it also examines market failure, i.e., when the market is unable to deliver useful outcomes.
The study of microeconomics considers various factors while assessing the behaviour of individuals and firms. Some of the factors are mentioned below;
Law of Supply and Demand
Fixed cost and Variable cost
The Elasticity of Demand
Market Failure and Externalities
After observing the changes on a micro level, this branch of economics deals with the nation's economy. It focuses on the changes in the economic output, interest on foreign exchange rates, GDP, changes in employment, and inflation, as these essentials determine sound growth of society/economy.
Macroeconomics deals with the entire economy's performance, structure, and behaviour while analysing. As it considers the whole economy, the working areas in macroeconomics are divided into two broad parts: long-term economic growth and the short-term business cycle.
Examining every sector/industry of the economy and its correlation is crucial to understanding the nation’s economy. By making necessary observations, the economists develop models that explain the changes in the economy due to variables like GDP and inflation. These models and forecasts thus, make a path for the government to work on. From hereon, the government entities use these assessments to construct and evaluate new economic, monetary, and fiscal policies that can help develop the economy.
Apart from the government, businesses use these predictions to set strategies in domestic and global markets; the investors also make the most out of it by planning the movements in various asset classes. This gives the investors and businesses a thorough understanding of the effects of new economic trends and policies on their industries.
The entire process must be executed with mindfulness as the study of macroeconomics works on an enormous scale.
This interesting branch of economics uses statistical and mathematical models to develop theories and predict future trends from historical data. In simple terms, it turns theoretical economic models into useful tools for economic policymaking. The methods used in econometrics rely on the statistical conclusion to analyse economic theories with the help of tools like probability, frequency distribution, correlation analysis, and many others.
In basic terms, econometrics makes things more practical and calculative in nature. It transforms qualitative statements into quantitative statements and theoretical models into something that can be calculated or estimated. It is thus a practical approach in the field of economics.
There are several sections of economics where econometric methods are used to gain effective results, such as;
One of the basic tools for econometrics is the multiple linear regression model that models a relationship between a scalar response and more than one explanatory variable. The professionals in this field or the econometricians try to find estimators that everyone can rely on, and they should also possess statistical properties like unbiasedness, consistency, and efficiency.
Though it is a science, econometrics can also be considered an art that demands considerable judgment and can eventually obtain useful estimates for policymaking.
While understanding economics, we must know the basic economic terms and concepts used in this world. Most of these terms are usual and are part of our daily life but generally, we don’t look at them through the lens of economics. Let’s get some insights on these terms.
Supply and demand are generic processes that are easy to spot around us. To understand these two more clearly, we must take an example. For instance, a person goes out to buy vegetables, and there are different prices for every product because of its multiple meditators. But when the buyer and sellers finally meet at a particular price, then that is what we call the state of supply and demand, where demand meets the supply.
In simple terms, value for money defines the utility derived after spending any amount to purchase any service or product. The value that you are deriving after the expense that you have made. This can easily justify the pricing of a commodity; there is a specific price for every good and service, which is given considering the amount of utility it will provide. Thus, the basic rule is to spend money on goods and services according to their utility.
Scarcity is a common term that we understand, but in economics, it is related to the limited/scarce resources available to meet our unlimited wants. Perceiving the real-world conditions, scarcity is heavily taken into consideration to make economic decisions. That includes their choice of allocation of available resources in an optimum way that satisfies their maximum wants. Scarcity of something makes the person responsible while using it.
Our world offers multiple things. If we tend to buy one, there are plenty of options to choose from. Hence, you will always lose something or other while choosing the best for yourself. So, the item that you did not choose, you tend to pay an opportunity cost for that. For example, if you decide to spend Rs. 3000 on a pair of jeans rather than getting the required set of books, the opportunity cost would be the money you could’ve spent on the books and several other things.
It simply means the ability of a person to buy any product or service. Purchasing power is defined by the amount of money one has. It can also be termed as the currency's value expressed through the number of goods and services that one unit of that money can buy. There can be a serious jolt in the purchasing power of someone due to inflation. This happens when the income remains the same, but commodities' price rises.
Apart from all the concepts mentioned above in economics, there are some basic terms that you should know about.
Commodity- These are the raw materials that are purchased in huge quantities for the process of production
Equity- It can be described as the ownership of an asset.
Elasticity- This reflects the amount of change in an economic variable in response to another, like when the demand increases when the prices are low and vice versa.
Liquidity- The ease with which an asset gets converted into cash without changing the market price.
Leverage- The technique of purchasing stuff with borrowed money in the hopes that future profits will be much more than the cost of borrowing.
GDP- It can be defined as the total value of goods and services produced in a country in a specific timeframe.
GNP- It is slightly different from the GDP as it calculates the production of goods and services by the citizens of the nation from wherever they are within a specific financial year.
CPI- It measures the changes in the prices of goods and services acquired by individuals to satisfy their wants. When CPI increases, it indicates an increase in inflation.
Inflation- It reflects the rate of increase in prices of goods and services over some time. It translates as an increase in the cost of living.
Economic Depression- It is that period for a country’s economy when it suffers from a long-term downturn and a state of financial turmoil.
Here are some principles associated with economics.
People cannot always get what they want; this is where the trade-offs take place, which extends a policy that enables people to trade one thing for another. This also pretty much sums up human lives. We trade off a majority of things in life; for example, students spend time in college to eventually become what they desire, and the government spends revenue for the well-being and development of society.
This simply reflects the human nature of choosing the best option. It essentially means systematically doing your best to achieve your objectives. For example, whatever your income is, you will tend to buy the best products and services within your capability and enjoy maximum satisfaction from it. People often take important decisions by comparing marginal benefits, i.e., benefits you receive with an additional unit of your purchase, and marginal cost (the extra amount you are spending to buy one more unit).
It is one of the human tendencies to fall prey to incentives. People get inclined toward incentives because it does appeal to their values. In brief, incentives are those things that induce one to act. For example, offering a salary hike to the person who works hard will make the employees work harder to achieve the incentive (salary hike).
Today, every peaceful trade is a result of capitalism. Capital allows people who do not know each other and do not have any link to trade calmly. It permits them to produce whatever they wish to and earn money (standard currency) through it, then trade that money to purchase an entirely different thing. A solution to the existing barter system also created an efficient market for all.
One can witness the huge difference in the standard of living in different countries, for example, U.S and India. Mostly these disparities are found between the developing nations and developed nations. One of the crucial reasons behind these differences lies in the less productivity in the developing nations compared to the developed nations. Thus, it is essential to make policies considering their effect on the productivity of goods and services. A country’s rise in productivity will help increase the per capita income, hence raising the standard of living.
Studying the principles of economics offers you an upper hand while analysing economic events and finding solutions to the crisis.
Mathematics is an imperative part of the study of economics and works as a fine tool for economists when analysing and drawing conclusions from it. As we already know, economists deal with massive data, and extracting meaningful outputs from it is a great task. So, mathematics is included in economics to simplify the process and get specified results.
There is a broad application of mathematics by economists, such as:
The objective of Mathematics for Economists are;
To study economics problems with the use of math as a tool
To comprehend the problems of mathematical economics
To discover solutions for these by finding a connection between the variable and the data
To gather insights into current & future problems
Along with the advantages of mathematics, economists also extended some criticism regarding the analysis module. They argued that some features of human behaviour and their choices could not be reduced to mathematics.
Business economics can be defined as the amalgamation of business practices and economic theories that result in clarity and ease in decision making and future planning. The social science of economics helps to formulate logical managerial decisions. Apart from decision making, business economics also guides capital budgeting, production analysis, price analysis, and risk analysis.
Here are some of the essential principles of Business Economics that you must know;
As we previously studied, opportunity cost refers to the cost of sacrificing the alternative while selecting a specific product or service. In the business world, the opportunity cost principle means that a firm can employ a factor of production only if that factor satisfies or earns more than its opportunity cost. For instance, if a man plans to leave the job that gives him a monthly salary of 50k and starts a business, then his opportunity cost will be 50k for running his own business.
As per the discounting principle, if a decision in a business affects the cost and revenue structure of the firm in the future, then all those costs and revenue must be discounted to present values before a comparison of alternatives is possible. This practical approach is essential because the future is uncertain, and one must know the actual worth that their investment can yield. This process can also be defined as the transformation of money that you will earn in the future into an equivalent number of present amounts.
According to this principle, a business decision is considered rational only if it helps in profit maximisation, which means the total revenues are higher than the total cost. The marginal analysis refers to the small changes like the impact of change in one variable on the other. In contrast, the incremental analysis reflects the company’s performance in respect of a managerial decision. It calculates the cost and revenue change due to certain policy changes.
Firstly, it is better to understand marginal utility, which refers to the utility received by consuming an additional unit of a commodity. Equi-marginal utility suggests that a consumer will reach the state of equilibrium only when every commodity he consumes gives him equal marginal utilities.
As per a consumer, his income will be spent accordingly on different goods so that the marginal utility of each product is proportional to its price.
MUx / Px = MUy / Py = MUz / Pz
Where MU represents marginal utility and P is the price of goods.
As per producers, he will make rational decisions while allocating scarce resources that will equalise the ratio of marginal returns and marginal costs of various uses of resources in specific use.
MRP1 / MC1 = MRP2 / MC2 = MRP3 / MC3
MRP refers to inputs' marginal revenue, and MC represents a marginal cost.
This principle of business economics gives due importance to time. It states that no matter what decision the authority is making, it must consider both short-term and long-term impacts of that decision on the company. Both periods are equally important for a firm to grow.
However, different sets of changes can take place in these different periods. As in the short-run, some factors are fixed, while others act as variables. During this time, production can be maximised by increasing the number of variable factors. During this time, the consumers also tend to respond to the price change per their preferences.
While in the long run, most of the production factors are variable, and consumers can take a long time to decide and respond to the price change.
As we already know, Managerial Economics works as a guide for the managers or people in the decision-making position of a company. It leads them to a path of logical decisions and provides rational solutions to overcome the obstacles that come their way. Managerial Economics mainly works on the theory of microeconomics, which lets firms operate more practically despite using economic theories.
It is regarded as the essential element for a business because of its wide and affectionate use while allocating resources. Decisions regarding customers, suppliers, competitors, or even a firm's internal functioning are guided by managerial economics. The entire process uses various statistical and analytical tools to evaluate economic theories and use them in solving real-life business problems.
The ultimate aim of managerial economics is to expand the company's wealth. In simplest terms, the decision-making process in managerial economics involves establishing a company’s objective and then finding out the obstacles to achieving those objectives. After the problems are identified, various alternative solutions are made, and among those, a final alternative is selected and implemented.
Managerial Economics is a combination of both economic theory and econometrics for rational decision-making. Using econometrics means it uses factual data to acquire the solutions for a firm's economic problems.
Here are some significant concepts related to Managerial Economics;
A market is a democratic space where customers make choices and decisions as per their wants. A business must consider and give value to customers' choices and market trends. Otherwise, it may lead to market failure.
Following traditional concepts and tools running through ages do not meet current customers' demands. The business must include a creative approach in its decision-making to be in a better marketplace and satisfy new consumers.
The normative view of managerial economics states that administrative decisions are based on real-life experiences. It is taken by the higher authorities who understand the market thoroughly as they have a systematic method of analysing the consumers' demand, forecasting future trends, techniques for cost control, and ideas for product design and promotions.
The field of economics is expansive, with detailed concepts to understand its intricacies. In order to cover all the concepts, there are different economics courses available on both online and offline platforms. One can opt for any economics certification course to learn economics and widen their career options and be in a position of high demand.
Some of the Economics Courses are listed below;
B.A. in Business Economics
B.Com. (Applied Economics)
Masters in Economics
M.Com (Applied Economics)
M.Sc. (Financial Economics and Administration)
M.Phil. (Business Finance & Economics)
PhD (Business Economics)
Diploma Course in Economics
Behavioural Economics in Action
Economics: Consumer Demand
Understanding of Macroeconomics and Microeconomics
Understanding Economic Development
Economics of Money and Banking
Online Economics Classes offer a wide range of benefits in comparison to the available offline courses.
Let’s look at why opting for economics courses online can be profitable for the future rather than offline courses.
Flexibility- Online classes provide the utmost level of flexibility incomparable to any other mode of education. It lets you decide the time and learning pace with which you will be comfortable. This is quite commendable as you get to learn properly, according to your learning pace. Such flexible learning plans enable you to obtain as many skills as possible as per your time and pace.
Global networking- Online programs providing economics certification courses or economics classes can be a great place to widen your network for the future. Online classes extend an opportunity to connect with people from different regions, mentors from reputed universities, and even industry experts worldwide.
Convenience- Online economics classes are the most convenient as they don’t require travelling to attend classes. Even the study materials are accessible to you from the comfort of your home.
The economics courses will guide you in pursuing your dream to become an economics specialist or any other profession relating to the field.
The following topics are usually covered under the Economics Course;
What is Economics?
Fundamental Principles of Economics
A major development in Economic Thought
Statistics for Economics
Branches of Economics (Microeconomics, Macroeconomics, and Econometrics)
The Economic theory of Crisis
Economical Solution to Crises
Tools for Economic Analysis
Quantitative and Qualitative Techniques for Economic Analysis
Economic Theories and their Application in the Real World
Understanding the Hyperconnected World
Average Salary Hike
Analyse the environment, conduct user research across online and offline retail shoppers, suggest features of improvement for a seamless experience and metrics to measure your success for a niche e-commerce apparel brand.
Establish the target market for hourly booking of hotels, user needs, growth opportunities, and build a Minimum Viable Product (MVP) and identify relevant success metrics.
Analyse and improve the transnational funnel of the online ticketing platform.
Help increase the number of recharges for Freecharge by improving the growth hack funnel. Propose retention, referral and revenue growth hacking strategies to achieve business goals.
Conduct an analysis of key competitors of a healthcare product
Create a business plan for cab-sharing app’s expansion to the Indian market and represent it using the Business Model Canvas
Design and sketch a wireframe for a hypothetical health-based app that tracks and monitors health and fitness
Create a product backlog and figure out epics and user stories for a feature for an OTT platform
Prioritise tasks and feature updates for a cab-sharing app’s operations
Economics is an imperative part of our life which extends across all aspects. Be it the optimum allocation of our resources or to generate maximum profit from a business, the knowledge of economics is essential.
Once a student learns economics, they attain quality skills that can benefit them to upscale their career. These skills include analytical and problem-solving skills, understanding the workings of the market, trends of the economy at large, and several other skills as well. All this adds up and helps the student be a professional with high demand.
It is essential to have an Economics Specialist in a growing Business to study the financial, market-related, organisational, and environmental issues individuals and organisations face. The economics specialists also focus on the production, distribution, and consumption chain.
There are a few skills that a person requires to become an Economics Specialist and to perform his task properly. Here are some of those skills;
Some of the key concepts of economics are listed below;
No, there’s no compulsion as such to have economics or mathematics in previous classes. You can avail the online economics courses anytime as per your preference.
There are various job positions available after completing Economics Courses;
The typical duration to complete a graduation course in economics requires 3 years, and a Master’s course needs 2 years to finish.
A person with an economics certification is respected in the professional field by the higher authorities because of their set of skills related to economics.
It uses statistical and mathematical methods to develop economic theories and future trends by analysing and studying the historical data.
The field of economics is one of the progressing fields and has worldwide demand for its professionals. Once you acquire quality knowledge of economics, there are huge chances of you getting success in your career.
These are some of the professions of a particular industry that pays highly to economics specialists.
In India, the highest pay for an Economics Specialist is around Rs. 1,18,452 per month.
To increase or promote yourself in your career and get a salary hike as an economics specialist, you must level up and include more of your skills. Moreover, an MBA or a master’s degree in this field can help you level up.