Demi’s Basic Business Questions: What is Economics?

Welcome back to college and the first of “Demi’s Basic Business Questions” for this academic year. This week we’re going to be taking a look at uncovering one of the various “business” subjects and make them a mystery no more. Who knows? Maybe knowing the difference between all of them will encourage you to join me in my Intermediate Economics module this semester or go for that Big 4 Assurance internship position.

The textbook definition for Economics is the study of how society uses its scarce resources. What are our scarce resources you may ask? Our money is scarce. Our time is scarce. Land is scarce. So much is scarce. Economics, in studying our choices, is studying human behaviour; Economics is a social science and therefore it is unpredictable. 

Economics is split into two parts – macroeconomics and microeconomics. 

Macroeconomics concerns the big players. That’s our government, that’s the European Union, the World Trade Organisation. Macroeconomics looks at how these big players make decisions in relation to their money. It studies the benefits of international trade, it suggests metrics for measuring how well the economy in a country is doing (GDP, GNP etc. etc. ) and reminds us that the solution is not to print more money. Microeconomics looks at how businesses make decisions in relation to money and how they interact with consumers. 

Microeconomics has a very strong focus on individual behaviour. It makes you open your eyes a bit too. Take for example the law of diminishing marginal utility. It tells us that when you eat several chocolate bars in a certain period of time, let’s say an hour, it gets to the point where eating subsequent bars is less satisfying. Practically, it gives us a textbook evidence for why we instinctively know when to “save it for later”. It also talks us through how hand sanitisers could cost up to 16 euro at the start of lockdown. Supply and demand. As demand increases, price increases. Prices are rarely based solely on the worth of a good. Microeconomics teaches us about perfect competition and how if you increase the price of your oranges on your Moore Street stand, you’re in trouble.

Working as an economist can mean so much. It can mean devoting yourself to academia and producing memorable work like “The Economics of Happiness”. It can mean working within a tech company and advising on how the company can work best to maximise their profits while in competition with other sellers. Economists can work in economic think tanks, predict trends such as unemployment and recession. Economists can advise the government on their spending (Budget 2021 anyone?). In short, economists can do a lot. 

To conclude, Economics is quite cool.

If you have any basic business questions you are interested in me tackling, please do not hesitate to send me on an email: dadenira@tcd.ie

Yours in Learning,

Demilade

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