Economics

History of the Concept of Economy

 The word economy is Greek and means
"household management." 
 The Scottish philosopher and economist
Adam Smith, who in 1776 wrote the famous
economic book called The Wealth of Nations,
was thought of in his own time as a moral
philosopher. He and his contemporaries
believed that economies evolved from pre-
historic bartering systems to money-driven
and eventually credit-based economies. 
What Is an Economy?
 

An economy is the large set of inter-related production and consumption activities that aid in
determining how scarce resources are allocated. The production and consumption of goods and
services are used to fulfill the needs of those living and operating within the economy, which is also
referred to as an economic system.
Types of Economies

 Market-based economies allow goods to flow freely through the market, according to supply and demand
. 
 
 Command-based economies are dependent on a central political agent, which controls the price and
distribution of goods. Supply and demand cannot play out naturally in this system because it is centrally
planned, so imbalances are common.
 
 
 A Mixed Economy combines elements of free-market and command economies. Even among free-market
states, the government usually takes some action to direct the economy. These moves are made for a
variety of reasons; for example, some are designed to protect certain industries or help consumers. In
economic language, this means that most states have mixed economies.
Four key economic concepts—scarcity, supply and demand, costs and
benefits, and incentives—can help explain many decisions that humans
make.
  The branch of knowledge concerned with the
Definition of production, consumption, and transfer of
wealth.
economics.  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 on allocating resources
to satisfy their wants and needs, trying to
determine how these groups should organize
and coordinate efforts to achieve maximum
output.
Economics can generally be broken down
into macroeconomics, which concentrates
on the behavior of the aggregate economy,
and microeconomics, which focuses on
individual consumers and businesses.
Types of Economics
Micro-Macro economics
Microeconomics
Microeconomics focuses on how individual consumers and firm make decisions; these individuals can
be a single person, a household, a business/organization or a government agency. 

Analyzing certain aspects of human behavior, microeconomics tries to explain they respond to changes
in price and why they demand what they do at particular price levels.
Macroeconomics
Macroeconomics studies an overall economy on both a national and international level. Its focus can
include a distinct geographical region, a country, a continent, or even the whole world. Topics studied
include foreign trade, government fiscal and monetary policy, unemployment rates, the level of
inflation and interest rates, the growth of total production output as reflected by changes in the Gross
Domestic Product (GDP), and business cycles that result in expansions, booms, recessions, and
depressions. 
Schools of Economic Theory

Two of the most common are monetarist and Keynesian. 

Monetarists have generally favorable views
on free markets as the best way to allocate
resources and argue that stable monetary policy
is the best course for managing the economy.
In contrast, the Keynesian approach believes
that markets often don’t work well at allocating
resources on their own and favors fiscal policy
by an activist government in order to manage
irrational market swings and recessions.