What you need to know about Economics

On a day-to-day basis, we encounter the world of economics. Economics is a social science that focuses on the production, distribution, and consumption of goods and services. Economics has two disciplines which are macroeconomics and microeconomics. Microeconomics refers to the methods that individuals and firms use to make financial decisions on what to purchase rather than influencing their consumer behavior. The dynamics taken into consideration include supply and demand and the cost associated with production and the provision of goods and services.
Macroeconomics studies the general economy and focuses on national and international levels.
To fully understand the economy, we must assess the general factors that define Economics. These factors include scarcity, supply and demand, cost and benefits, and the law of diminishing returns. Each fact has its separate meaning and effect on the economy. However, each factor is relative to the other, which tells the story of Economics and how it affects everyday life.
Scarcity
The Scarcity term lingers in our minds since we might have interacted or lived through the effects of scarcity at one point in our lives. Limited resources are the main components of scarcity. People and governments often dictate how limited resources get distributed to people who need them the most. For example, due to global warming fertile lands have become scarce causing a drop in food production in turn resulting in increased food prices. Another effect of scarcity would prompt the need to reclaim land in order to counter food shortage. If you can see the relationship between resources, need, and pricing, you can understand how scarcity directly relates to supply and demand.
Supply and demand
Markets are built on these concepts. The law of supply and demand states that when supply is low, demand is high. Basically meaning if product production is low, it is less accessible, and as a result, there is a higher demand. When you have an abundance of a product, it is easily accessible and, demand is low. An example of supply and demand is the toilet paper and paper towel craze during the pandemic. People wanted toilet paper and paper towels, and the demand for paper towels and toilet paper increased and means more people wanted toilet paper and paper towels. There was an increase in demand for toilet paper and paper towels. Due to the increased demand, the suppliers charged more for toilet paper and paper towels. The supply/demand flattened when the suppliers flooded the market with toilet paper and paper towels. When the supply of toilet paper and paper towels increased, the prices dropped. We have seen other examples of the price fluctuations in the development of new telephones, games, sneakers, etc. When new products get introduced to the market and the product is marketed effectively, you can see the rule of supply and demand at work.
Costs and benefits
Costs and benefits are affected by consumer needs and behavior. For instance, the bread company with increased demand will increase the number of workers working for them, if and only if the additional costs are justified.
On the consumer side, the consumer has a tendency to buy the best piece of bread that comfortably fits the money they are willing to lose and not necessarily the best tasting or most nutritious bread. As you can see, there are two variables to this analysis of the same product. On one hand, the business is assessing the needs based on possible demand increases. While on the other hand, the consumer is basing his/her decision on financial ability and need more than preference.
Law of diminishing returns
The Economics Law of Diminishing returns states that if one input in the production of a given product increases and all other factors are “fixed,” a point will arise where additions in the input will be diminished, which increases output. For instance, a production company works at its optimum and opts to add more workers to increase productivity. The company fails to change the system as they usher in new workers and will eventually cause reduced productivity among all workers and not increased productivity as initially predicted.
Economics is part of us. If you want to understand the economics behind availability and price determination, you need to read and study the principles of economics. They offer a firm ground in understanding our day-to-day economics.