Question

Many people think that economics is the study of money, financial management, and investment, but that is not the case. Explain with examples what are the main concepts that are the backbone of economic studies?

Answer 1

Main topics of Economics:

Trade off: As resources are constraint or people do not have enough money to buy everything they want. They have to trade off between goods which give them maximum utility from spending money. Assume you have limited money and wants to buy a luxury car or a house, you have to trade off between these two goods such that your money spent gives maximum satisfaction out of it.

Scarcity of Resources: Trade off occur because of scarcity of resources. Producers need to take care of scarcity of resources and utilize their input to their fullest such that maximum number of goods can be produced out of it and minimum is the wastage.

Incentive: People are offered incentives to produce what they produce. To maximize the usage of input while taking care of scarcity of resources, producers must be offered some incentive such that it result in socially efficient outcome while consumers also must be incentivized such that they consume what is desired and avoid excess consumption.