Discuss the principles of Economics
Introduction
Economics studies the management of a society’s scarce resources. It deals in how people make
key decisions, what and how much they buy, how they save and invest and how much they work.
Economics is a discipline that studies how people interact i.e. how buyers and sellers trade and
interact and how their prices are determined in the market. Economics enables the analysis of
various market forces and trends that ultimately affect the general economy. These factors may
be the rate of average income growth or the rate at which the prices of products are increasing.
1(Samuelson, P. A., William D. N. Economics)
The economy is made up of households and companies. Economics attempts to relate how the
households and companies make critical conditions under conditions of scarcity. These decisions
involve some kind of tradeoffs i.e. efficiency versus equality or electronic goods or consumer
goods. The production possibilities frontier (PPF) curve indicates examples of combination of
various outputs that the economy can sustain. To obtain more of a particular good then you have
to receive less of the other good. 1 ( Sullivan , S. Economics: Principles in action)
Principles of Economics 2
1 Samuelson, P. A., William D. N. Economics
2Sullivan, S. Economics: Principles in action
The price of an item or its costs is what you are willing to give up in order to gain an item. The
opportunity cost of an item is the cost of the item that’s given up in order to get the required
item. In the PPF curve, the opportunist cost is what is given up in order to produce more of the
other good.
The law of supply concurs that the higher the prices of the market are the more quantity the
companies will supply. And also the higher the prices the lower the demand.
The government also interferes with the public policies which may lead to imperfect processes
and diminished inequality.1 (McCann, C.J. The Elgar Dictionary of Economic Quotations)
Principles of economics involve how people make certain decisions. Average and rational people
make systematic decisions that are purposeful and the best ones that can make them achieve their
major aims.
Principles of Economics 3
1McCann, C.J, Jr., The Elgar Dictionary of Economic Quotations,
Reference.
Sullivan , S. Economics: Principles in action. Upper Saddle River, New Jersey
Pearson, Prentice Hall. 2003.
Samuelson, P. A., William D. N. Economics. 18th ed., McGraw-Hill, 2004.
McCann, C.J, Jr., The Elgar Dictionary of Economic Quotations, Edward Elgar, 2003.
