Economics is a social science which studies allocation of scrce resources having alternative use in such a way that-
a) consumer get maximum satisfaction
b) producer get maximum profit
c) society get maximum social welfare
Examples of Economics
1. Opportunity Cost
Opportunity cost refer to the benifits of an individual and business loses when it chooses another alternative.
Oppotunity cost = Return of best option forgone - Return of option choosen one
Consider a business can invest in stock market to get 20% return or could invest in upgradartion of equipment which give return of 15%. If company invest in updating of equipment it is foregoing a return of 5%(20%-15%). The 5% is opportunity cost for the company.
2. Supply and Demand
Supply and demand is the basic law in economics. Supply means number of goods producer wants to sell at a price and Demand means the consumer willing to purchase goods at a given price.
Intersection of demand curve and supply curve at a point is known as equilibrium point.
When wheat production increases the farmer decrease their prices so that they can sell easily. If supply is high as compared to demand then output is wasted and farmer lost their cost of production
3. Sunk Cost
It is the cost which is incurred by the company and it can not be recovered. It is past cost made by company and it excluded from future decision of company.
A company produces cricket bat for $60 and sells at $100. The crickets bats are basic as compared to premium crickets available in the market. If company make premium bats cost addtional $20 so company will consider only additional cost i.e. $20. The cost of factory or warehouse etc. are not considered because it is already invested and they are already sunk cost even if comapny produces premium bats.
4. Trade war
Every nation wants to protect their economy, local business and local industry because it creates employment opportunities and the woluld like to protect interset of country's business.
Countries impose high tariff on imported goods. From this other countries also retaliate and impose even higher tariff so it create a conflict situation known as Trade wars.
The best example of trade war is of USA and China. As USA imposes tariff on imported goods from china so China also imposes high tariff on imported goods from USA and this not only affect their countries but also affects global trade and global economy because both are the large economies of the world.