Economics Essay: Defining Economics and Analyzing Economic Systems

This essay provides a comprehensive overview of economics, defining it as the study of resource allocation in the face of scarcity. It explores the two main branches: microeconomics, which focuses on individual and firm behavior, and macroeconomics, which examines economy-wide issues such as inflation and GDP. The essay then delves into different economic systems, including traditional, command, market, and mixed systems, highlighting their characteristics and how they function. It also touches upon the theory of comparative advantage and its role in international trade. Furthermore, it discusses the challenges of economic growth and the importance of sustainable development. The essay references key economic concepts and the impact of various factors on economic performance, aiming to provide a foundational understanding of the subject.

Running head: ECOLOGY ECONOMY
ECOLOGY ECONOMY
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Economics
Economics is the study of resource allocation across economies with respect to limited
resources and unlimited wants. It is the social science that drives distribution, production and
consumption of goods and services in an economy. Wants are limited and it is important to
allocate resources like land, labor, capital, money, equipment, efficiently such that it satisfies that
wants can be fulfilled. It is used to study the problem of scarcity that arises from limited
resources and unlimited wants, in order to satisfy the basic needs of the society (Mankiw 2016).
It is a vast subject that is adequate to understand the current status of the economy and make new
financial policies that will lead to a better economic performance ad greater well-being.
The study of economics is considered as a social science as it explains how society deals
with the scarcity problems and how goods are allocated across markets and economies. It is
recalled as a science because as experiments are performed to understand its observations and
use it to make goods. Similarly, the performance of economies are denoted by the way market
structures are formed and polices are implemented. These policies will have a huge impact on the
economy as efficient policies will enhance the well-being of the people and any negative effect
will lower the quality and living standard.
Economics helps to study the structure of markets in an economy and implicate ways on
increasing the level of efficiency. It is estimated by several parameters that is effective to
understand how well is the economy doing, which is done by examining the statistics about the
economic state and explain its significance. This can adequately change the value of goods and
services in the economy with respect to additional changes in the market. Accordingly, a range
of polices are adopted to improve the economic conditions of an economy.

Economics is divided into two main categories, microeconomics and macroeconomics.
Microeconomics is described as the branch of economics that is related to the behavior of
individuals and firms and the decisions taken by them to make efficient allocation of resources.
This is studied with respect to demand supply, equilibrium price and quantity, availability of
resources, tastes, consumer behavior and other factors at an individual, group or company level
(Kagel and Roth 2016). On the other hand, macroeconomics studies the issues that affect the
economy as a whole such as price levels, inflation, interest rates, rate of economic growth,
national income, changes in unemployment, Gross Domestic Product (GDP), purchasing power
parity, currency fluctuations, exchange rates and economic development. This branch estimates
the performance of economies on a regional, national and international scale.
Macroeconomic conditions can have a huge impact in the economy that can make
changes in the microeconomic parameters. Change in interest rates and inflation will denote the
demand for goods in the economy. A higher demand raises the aggregate consumption and
expenditure which allows firms to extract enormous profits (Haggard and Kaufman 2018).
Accordingly jobs are created and rate of unemployment goes down in the economy. This raises
the income level, standard of living and a better economic growth. Similarly, currency
devaluation lowers the price of domestic goods and reduces the level of imports.
Economics is based on the theory of comparative advantage such that an individual or
economy will produce that good in greater amount in which they have a comparative advantage
in production. They can produce the good at lower cost that raises demand for the product in
national and global economy and likely goods are traded. This forms the basis of international
trade such that higher level of exports raises the aggregate output or income of the economy. It is
based on a cycle that shows that income flows from households to firms as they buy goods and

then back to household in the form of wages of workers. However, the demand for goods is
dependent on the nature and its supplements or complements.
Each economy is unique in its own way and differ from one another. The performance of
the economies is based in the way it operates. There are four types of economies in general,
traditional economic system, command economic system, market economic system and mixed
economic system. The tradition economic system is the most ancient form of economic system
which is mostly followed in the rural areas where two-third of the economy is based on the
agricultural activities. There is no much power to generate surplus and the system lacks
technology and advanced medicines.
Command economic system is governed by a central power where decisions regarding
planning to redistribution of resources is actively taken by the government. Government owns
most of the industries like railroad, aviation, utilities and small industries. It can create jobs for
the people at an affordable rate. Market economic systems are those there is no government
control and goods are allocated by the forces of demand and supply in the market. Consumers
and buyers meet denote the equilibrium price and quantity based on their demand and supply.
There is no intervention of government and private companies are able to operate in an effective
way. The market is governed by an invisible hand such that market conditions automatically
comes into equilibrium.
Another form is the mixed economic systems which is a culmination of command and
market system as it is partially controlled by the government. Production of certain sectors are
under the control of the government like transportation, railroad and defense (Jackson and Victor
2019). Private companies are able to operate on their own. Economies are basically mixed
economic system where there is government whose intervention in certain markets is needed for

efficient allocation and government makes effective policies to raise the growth rate. Private
firms can produce goods and allocate them in other economic without any regulation from
government.
The aim of the economies is to raise the output that raises the overall GDP and growth
rate. However, excessive production of goods and services can degrade the quality of the
environment and hamper future economic growth. Expansion of economic activities has led to a
rise in economic growth, but has created several economic pressures. As a result, world faces a
global challenge of expanding the economic opportunities across economies with respect to
rising population growth (Liebreich 2018). This needs to be maintained with respect to
sustainable development by meeting the needs of the present population and keeping is resources
for the future generation by allocating resources efficiently.

Reference List
Haggard, S. and Kaufman, R.R., 2018. The political economy of democratic transitions.
Princeton University Press.
Jackson, T. and Victor, P.A., 2019. Unraveling the claims for (and against) green
growth. Science, 366(6468), pp.950-951.
Kagel, J.H. and Roth, A.E., 2016. The handbook of experimental economics (Vol. 2). Princeton
university press.
Liebreich, M., 2018. The secret of eternal growth.
Mankiw, N.G., 2016. Principles of economics. Cengage Learning.
Parker, S.C., 2018. The economics of entrepreneurship. Cambridge University Press.