In order to begin our discussion of economics, we first need to understand (1) the concept of scarcity and (2) the two branches of study within economics: microeconomics and macroeconomics.
1. Scarcity
Scarcity, a concept we already
implicitly discussed in the introduction to this tutorial, refers to the
tension between our limited resources and our unlimited wants and
needs. For an individual, resources include time, money and skill. For a
country, limited resources include natural resources, capital, labor
force and technology.
Because all of our resources are limited in comparison to all of
our wants and needs, individuals and nations have to make decisions
regarding what goods and services they can buy and which ones they must
forgo. For example, if you choose to buy one DVD as opposed to two video
tapes, you must give up owning a second movie of inferior technology in
exchange for the higher quality of the one DVD. Of course, each
individual and nation will have different values, but by having
different levels of (scarce) resources, people and nations each form
some of these values as a result of the particular scarcities with which
they are faced.
So, because of scarcity, people and economies must make decisions
over how to allocate their resources. Economics, in turn, aims to study
why we make these decisions and how we allocate our resources most
efficiently.
2. Macro and Microeconomics
Macro and
microeconomics are the two vantage points from which the economy is
observed. Macroeconomics looks at the total output of a nation and the
way the nation allocates its limited resources of land, labor and
capital in an attempt to maximize production levels and promote trade
and growth for future generations. After observing the society as a
whole, Adam Smith noted that there was an "invisible hand" turning the wheels of the economy: a market force that keeps the economy functioning.
Microeconomics looks into similar issues, but on the level of the
individual people and firms within the economy. It tends to be more
scientific in its approach, and studies the parts that make up the whole
economy. Analyzing certain aspects of human behavior, microeconomics
shows us how individuals and firms respond to changes in price and why
they demand what they do at particular price levels.
Micro and macroeconomics are intertwined; as economists gain
understanding of certain phenomena, they can help nations and
individuals make more informed decisions when allocating resources. The
systems by which nations allocate their resources can be placed on a
spectrum where the command economy is on the one end and the market economy
is on the other. The market economy advocates forces within a
competitive market, which constitute the "invisible hand", to determine
how resources should be allocated. The command economic system relies on
the government to decide how the country's resources would best be
allocated. In both systems, however, scarcity and unlimited wants force
governments and individuals to decide how best to manage resources and
allocate them in the most efficient way possible. Nevertheless, there
are always limits to what the economy and government can do.
Langganan:
Posting Komentar (Atom)
EmoticonEmoticon