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Scarcity of resources in society to fabricate goods and services and then allocating the sacred goods and services to the society are the main highlight of economics. The main resources that regulates a society are land, labor and capital and are allocated to generate the goods or services for the society and are meant to be used smartly in order to cope with the scarcity caused by the societal demand.
The mean through which a society allocates its scared resources to the people is termed as the market system which allow people to trade among themselves, within or across borders.
Economics is the source of knowledge that provides the skills and knowledge required for making decisions for the production and distribution of the scared resources.
So we can say economics have helped in acquiring a way of thinking towards the production and distribution of the scared resources. Microeconomics talks about individual buyer and studies the market system for small scale and focuses on the preferences and choices of individual buyer or consumer, firm or organization or other small economic units.
Considering and studying the choices and preferences of firms, organizations or any other large subsets of society and considering the aggregate performance of the society is termed as macroeconomics.
Every market has a buyer that creates the demand and a seller that manages the supply. Demand is usually represented by a demand schedule which highlights the quantity and price as initiated by the consumer. As explained by the law of demand, the relationship between price and quantity is inverse and is represented through a graph known as the demand curve and algebraically explained through the demand equation.
A change in demand might occur due to a change in the prices of other allied goods that include the components and the substitutes. Also, any change in the income of the buyers it will also result in a change in demand. For the normal goods, a change in demand is direct while for inferior goods the change is inverse.
Other reasons that may cause changes in demand are the changes in the preferences and expectations of the customers or consumers.
Supply is the other factor in shaping the prices and quantities of the market along with demand. It can also be represented through supply curve to know the relationship between price and quantity which in this case is directly proportional.
There can be either reduction in supply or increase in supply but this change is dependent on some factors like any change in the price of other goods will encourage the supplier to switch similarly the change in the prices of raw materials used in production will also affect the supply curve.
Another factor is the technological advancement which, if adopted, will result in increased prices, or it can also result in a reduction of the production prices and increasing demand.
A record of the changes occurred in the market place due to deflation, or inflation is known as gross domestic product or simply GDP. The rise in the prices results in inflation, while the downward fall in prices results in deflation. If the change is evaluated at the prices of some base year, it is called real GDP.
Unemployment rate refers to that skilled labor force which is well capable of working but are not being utilized for doing any work and are still unemployed. It does not include those who are capable of working, but are not willing to work; such people are termed as discouraged workers. Frictional describes the concept of not finding and matching the new jobs with the qualified labor, which is willing to work and the reason is mostly due to insufficient information about the new and current job openings.
On the other hand structural unemployment occurs mostly due the changes in the economy, which results in downsizing in organizations and restricting the workers from the work available due to lack of knowledge or not up to date knowledge. The basic principle of the classical theory explains that the economy changes itself and is self-regulating. Money as defined is anything that is accepted in transaction from one person to another for the sale and purchase of goods. Money can be used as:.
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