Economics Summary

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. Economics is concerned with the ideal distribution of scarce resources (limited availability of things that we desire) within society. For example, economics is concerned with which needs people have and which goods they want produced. An important element in economics is concerned with the extent to which governments can intervene in the economy to improve the economic provision of a minimal level of well-being and social support for all citizens. Economics is also concerned with wider issues such as economic growth and unemployment – issues that affect the whole of society.

Supply and Demand
The most basic model in economics concerns how the price and quantity of goods and services is determined. For example, if demand for a good rose, we observe that this usually leads to a higher price. This higher price in turn encourages firms to supply more. This simple model helps explain a whole variety of different issues and topics. For example, we can use supply and demand to explain wage differentials. A lawyer can command a high wage because the number of qualified lawyers is very low. Cleaners tend to get lower wages because there are many more people with necessary qualifications.
Behavior

Economics is concerned with decisions that firms and consumers make. For example, classical economics generally assumes that people wish to maximize their well-being; i.e. we assume firms wish to maximize profits and consumers wish to maximize their utility (happiness).

However, the real world is more complicated. Not all firms wish to maximize profits; they may seek to maximize market share or pursue other social / environmental objectives. Also people may not be rational but get caught up in irrational booms and busts (e.g. stock market booms, housing booms, dot com bubbles). Therefore there is a branch of economics known as behavioral economics.