ALHAMD ISLAMIC UNIVERSITY

We Change Lives

Name: Mohsin Qurban

Program: Masters in Public Health

Semester: 2nd

Subject: Social & Behavioral Sciences

Assignment Topic: Economics

Submitted to: Dr Jahangir Achackzai

Teacher’s Name

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Date: 26-09-2021

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ECONOMICS
Defination:
Economics is a social science concerned with the production, distribution, and consumption
of goods and services. It studies how individuals, businesses, governments, and nations make
choices about how to allocate resources
In other way we can also define economic as
“Economics can be defined in a few different ways. It's the study of scarcity, the study of how
people use resources and respond to incentives, or the study of decision-making. It often involves
topics like wealth and finance, but it's not all about money.”
Why do we study economics?
Economics plays a role in our everyday life. Studying economics enables us to understand
past, future and current models, and apply them to societies, governments, businesses and
individuals.
BASIC CONCEPTS OF ECONOMICS
There are four key economic concepts i.e. Scarcity, supply and demand, costs and benefits, and
incentives that can help explain many decisions that humans make.

Scarcity:
Everyone has an understanding of scarcity whether they are aware of it or not because everyone
has experienced the effects of scarcity. Scarcity explains the basic economic problem that the
world has limited—or scarce—resources to meet seemingly unlimited wants. This reality forces
people to make decisions about how to allocate resources in the most efficient way possible so
that as many of their highest priorities as possible are met.

For example, there is only so much wheat grown every year. Some people want bread and some
would prefer beer. Only so much of a given good can be made because of the scarcity of wheat.
How do we decide how much flour should be made for bread and beer? One way to solve this
problem is a market system driven by supply and demand.

Supply and Demand:

A market system is driven by supply and demand. Taking the example of beer, if many people
want to buy beer, the demand for beer is considered high. As a result, you can charge more for
beer and make more money on average by using wheat to make beer than by using wheat to
make flour.

Hypothetically, this could lead to a situation where more people start making beer and, after a
few production cycles, there is so much beer on the market—the supply of beer increases—that
the price of beer drops.

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Although this is an extreme and overly simplified example, on a basic level, the concept of
supply and demand helps to explain why last year's popular product is half the price the
following year.

Costs and Benefits:

The concept of costs and benefits is related to the theory of rational choice (and rational
expectations) that economics is based on. When economists say that people behave rationally,
they mean that people try to maximize the ratio of benefits to costs in their decisions.

If demand for beer is high, breweries will hire more employees to make more beer, but only if
the price of beer and the amount of beer they are selling justify the additional costs of their salary
and the materials needed to brew more beer. Similarly, the consumer will buy the best beer they
can afford to purchase, but not, perhaps, the best-tasting beer in the store.

The concept of costs and benefits is applicable to other decisions that are not related to financial
transactions. University students perform cost-benefit analyses on a daily basis by choosing to
focus on certain courses that they've deemed more important for their success. Sometimes this
even means cutting the time they spend studying for courses that they see as less necessary.

Incentives:

Economic incentives explain how the operation of supply and demand encourage producers to
supply the goods that consumers want, and consumers to conserve on scarce resources. When
consumer demand for a good increase, then the market price of the good rises, and producers
have an incentive to produce more of the good because they can receive a higher price. ON the
other hand, when the increasing scarcity of raw materials or inputs for a given good drive costs
up and producers to cut back on supply, then the price they charge for he good rises, and
consumers have an incentive to conserve on their consumption of that good and reserve it's use
for their most highly valued uses

TYPES OF ECONOMICS

Two major types of economics are microeconomics, which focuses on the behavior of individual
consumers and producers, and macroeconomics, which examine overall economies on a
regional, national, or international scale.

Unemployment, interest rates, inflation, GDP, all fall into Macroeconomics. Consumer
equilibrium, individual income and savings are examples of microeconomics.

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References:

https://www.investopedia.com/terms/e/economics.asp

https://www.investopedia.com/articles/economics/11/five-economic-concepts-
need-to-know.asp

https://byjus.com/commerce/microeconomics-and-macroeconomics/