Division of economics

1. Microeconomics — deals with the economic behavior of individual units such as

the consumers, firms and the owners of the factors of production. Such specific
economic units constitute a very small segment of the whole economy. Their
activities are presented and discussed in details.

2. Macroeconomics — deals with the economic behavior of the whole economy or

its aggregates such as government, business and household. An aggregate is
composed of individual units. The operations of the various aggregates and their
interrelationships are analyzed to provide a profile of the economy as a whole.
Macroeconomics is concerned with the discussion of topics like gross national
product, level of employment, national income, general level of prices, total
expenditures, etc.

Other Division:

Consumption
Consumption is the branch of economics that is concerned with spending by
households and firms on goods and services. Consumer spending is significant; it
makes up two-thirds of the U.S. gross domestic product.
Distribution
Distribution examines the allocation of the national income among various inputs, or
factors of production. Distribution also can refer to the distribution of income among
individuals and households.
Exchange
Exchange refers to the buying and selling of goods and services, either through
barter or the medium of money. In most economies, exchange occurs in a market,
the medium that brings together consumers and producers.
Production
Production involves combining inputs or factors, such as land, labor and capital, to
produce goods and services. Economists use a production function to study
the relationship between inputs and the goods and services produced.

Public Finance
Governments are active participants in the economy. Public finance is the division of
economics that studies taxation and expenditure by governments and the economic
effects.

Three basic economics decision

Price
In ordinary usage, price is the quantity of payment or compensation given by
one party to another in return for goods or services.

In all modern economies, the overwhelming majority of prices are quoted in (and the
transactions involve) units of some form of currency. Although in theory, prices could
be quoted as quantities of other goods or services this sort of barter exchange is
rarely seen.

Price can sometimes alternatively refer to the quantity of payment requested by a

seller of goods or services, rather than the eventual payment amount. This requested
amount is often called the asking price or selling price, while the actual payment may
be called the transaction price or traded price. Likewise, the bid price or buying
price is the quantity of payment offered by a buyer of goods or services, although
this meaning is more common in asset or financial markets than in consumer
markets.

Value

Value is worth of all the benefits and rights arising from ownership.
Two types of economic value are the utility of a good or service, and power of a good
or service to command other goods, services, or money, in voluntary exchange.

Supply

A fundamental economic concept that describes the total amount of a specific

good or service that is available to consumers. Supply can relate to the amount
available at a specific price or the amount available across a range of prices if
displayed on a graph. This relates closely to the demand for a good or service at a
specific price; all else being equal, the supply provided by producers will rise if the
price rises because all firms look to maximize profits.

Demand

The amount of a particular economic good or service that a consumer or

group of consumers will want to purchase at a given price. The demand curve is
usually downward sloping, since consumers will want to buy more as price decreases.
Demand for a good or service is determined by many different factors other than
price, such as the price of substitute goods and complementary goods. In extreme
cases, demand may be completely unrelated to price, or nearly infinite at a given
price. Along with supply, demand is one of the two key determinants of the market
price.

Law of Demand

In economics, the law of demand is an

economic law that states that consumers buy more
of a good when its price decreases and less when its
price increases (ceteris paribus).

The greater the amount to be sold, the smaller the

price at which it is offered must be in order for it to
find purchasers.
The law of demand states that, if all other factors remain equal, the higher the
price of a good, the less people will demand that good. In other words, the higher the
price, the lower the quantity demanded. The amount of a good that buyers purchase
at a higher price is less because as the price of a good goes up, so does the
opportunity cost of buying that good. As a result, people will naturally avoid buying a
product that will force them to forgo the consumption of something else they value
more. The chart below shows that the curve is a downward slope.

Law of Supply

Like the law of demand, the law of supply

demonstrates the quantities that will be sold at a
certain price. But unlike the law of demand, the
supply relationship shows an upward slope. This
means that the higher the price, the higher the
quantity supplied. Producers supply more at a
higher price because selling a higher quantity at
higher price increases revenue.
As the price of good increases, suppliers will attempt to maximize profits by
increasing the quantity of the product sold.

Law of Supply and Demand

Supply and demand is perhaps one of the most fundamental concepts of

economics and it is the backbone of a market economy. Demand refers to how much
(quantity) of a product or service is desired by buyers. The quantity demanded is the
amount of a product people are willing to buy at a certain price; the relationship
between price and quantity demanded is known as the demand
relationship. Supply represents how much the market can offer. The quantity
supplied refers to the amount of a certain good producers are willing to supply when
receiving a certain price. The correlation between price and how much of a good or
service is supplied to the market is known as the supply relationship. Price, therefore,
is a reflection of supply and demand.