Economics is a vital part of life. For one to survive a day and one, need to make transactions and trade a fair portion of the resources that he or she has to get the things that he or she needs but does not have. All of these transactions are examples of economics in play. The more resources that one has, the more items he or she can be able to get from them. Therefore, what is the definition of economics? Economics can be defined as the management, distribution, and allocation of resources for purposes of making calculated financial decisions concerning what to purchase when and in what quantities or what to save or invest where.
In the smallest level, we make budgets in our households so that we do not run out of resources like money for food, shelter, or any essential resource. We make budgets considering the total amount of resources that we have. For example, it will be unadvised for one to go to the theater to spend money before he has made sure that the money available to him/her can sustain his/her food, shelter and clothing requirements. Decisions are made not only according to the money available but also according to the order of priority of the things that he/she needs at that point. This prioritization according to the number of resources is what is known as economics.
Economics has crucial importance to us, and that is why mathematics scholars prioritize and study advanced economics in institutions. In these institutions, they learn more calculated methods of prioritization and allocation of resources and end up becoming professionals who advise individuals or companies on how to better plan and handle their resources. There are two kinds of Economics majors, macroeconomics and microeconomics. These two branches mainly study the same things but from different standpoints. This article will give a detailed introduction to these two branches of economics and what they entail.
The name micro in microeconomics could be taken to mean small or tiny to suggest that this is a small branch of economics. This could not be further from the truth. Micro in microeconomics is placed there to bring out the meaning that it is a branch of economics that is more concerned about the economic methods for individuals, families or organizations from the point of view that each of them is separate. This is to mean that micro economists study the way people, families and small companies can develop policies that would help them in the allocation of resources and budgeting of their utilization.
Therefore, in the practice of microeconomics, economists conduct various researches and collect data on market trends, prices of items and a lot of other variables that have financial impacts in the businesses of individuals or small groups of people. They then use complex mathematical models for analysis and projection so that they harvest information to do with the value of these items soon. They then express this information to the individuals or companies concerned to help them make financial plans on when to purchase or sell.
These economic projections also help small organizations in the pricing of their products. For individuals, most people use information from micro economists to determine which the best financial investment decisions are the best to make considering the data of previous investors and the profits or losses that they made by making similar investments.
The name macroeconomics is in itself definitive. Like micro in microeconomics, macro in macroeconomics does not mean that it is the larger branch of economics. It means that it is the branch of economics that takes a holistic approach to matters of finance and economics.
The topics in macroeconomics are the same as microeconomics, but in macroeconomics, the purpose is to figure out the policies that larger corporations, counties, and nations can develop to improve their financial positions. Macroeconomists collect the same kind of data that micro economists collect but for larger populations. What does this mean? It means that their data collection methods differ from microeconomics.
They conduct nationwide surveys using government agencies and larger privately procured companies. This data is used to analyze the trends of a variety of items like infrastructure distribution, the effects on the financial status of these different areas that have been brought about by the difference of the distribution of these resources. This information is then used by corporations to determine the markets to invest or not invest in. Governments use this information to make policies that would have an impact on the financial markets according to the information they get from macroeconomists. They also learn which areas require to focus on what sectors.
The banking industry is highly competitive, and banks need to develop innovative new products regularly to keep up with their competition. These products are developed after a thorough analysis of the performance of other prior products and final market analysis. Economists or actuarial scientists usually conduct this analysis.
Similar to banks, investment companies can only develop and modify their investment products after comprehensive market research analysis. This research helps in the projection of future trends and better target marketing of the developed products.
Insurance companies mostly use actuarial scientists for the development of their products, but they require economists to help them reinvest the revenue that they collect from their customers to ensure that they always have the necessary liquidity when they are presented with insurance claims.
Manufacturing companies require in-depth market analysis to figure out the quantities of the products they should produce. They use economists to foresee the response they should expect for their products in the market.
Government agencies require economists to provide them with the basic information necessary for them to develop policies that make up the basis for financial markets, pricing of products and allocation of levies and taxes.
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