Some introductory economics for the armchair economist

This article discusses some introductory economics for the armchair economist, namely the basic principles of economics that can be seen anywhere and everywhere.




What is Economics?


The US economy? The UK economy? Gross Domestic Product? International trade? Finance? Well, yes and no, but mostly no. In short, economics is about rational human beings making choices, and the how and why behind those choices. Economics can also usually answer the other interrogatives as well (who, what, when, where, and how much). Economics solves mysteries about human behavior. In some cases, this can be called sociological economics or psychological economics. Attempting to solve these mysteries is made easier with the use of assumptions and models, which I will delve into a bit later. Again, there may never be an absolute solution to a particular "mystery," but proposing some ideas doesn't hurt.




A real-life example that illustrates the answering of the aforementioned "interrogatives"

Yesterday, I bought some Peanut Butter M&M's (my favorite candy) at CVS.

* Who? Me, obviously. Unless I paid them or provided a service for them, what incentive would someone else have to go buy me candy?


* What? Peanut Butter M&M's. The M&M's cost the same as a Crunch bar, but I benefit more from the M&M's because I enjoy them more.


* When? Around 2:00 PM. Up until that time, the benefit of eating the M&M's didn't outweigh the cost walking down to CVS to get them. Thus I didn't have a high enough demand for them until 2:00.


* Where? CVS. There, the M&M's cost $.79. At Harris Teeter, they cost $.99. The obvious benefit is a savings of $.20. This is, of course, ignoring the fact that Harris Teeter is about 2 miles from my house whereas CVS is right down the street, thus CVS is even more beneficial.


* Why? Simply put, the benefits of receiving and eating the M&M's obviously were greater than the cost of acquiring them.


* How? I walked to CVS. I could have driven my truck or ridden a bike, but for me the cost of walking was less than that of driving or pedaling.


* How much? 1 pack. I bought 1 pack instead of 2 because the marginal benefit of the second pack of M&M's was not greater than its cost.

Assumptions


One of the key aspects of introductory economics is assumptions. Assumptions allow us to simplify the seemingly complex world in which we live and make certain aspects of it easier to understand. Essentially, they simplify situations or issues and make problem-solving easier and more approachable. For example, if we wanted to approach or understand international trade, we could assume that there are only two countries in the world and that each country produces only two goods. This is, in fact, the example that introductory economics textbooks use. While quite an unrealistic situation, the assumption simplifies the concept and we are able to have a better understanding and a narrower focus. Assumptions comprise the framework of economics, and everything and anything related to economics is built upon certain underlying assumptions.




Models


In third grade, I made a model of the solar system by attaching different sized painted styrofoam balls to some wire clothes hangers. Similarly, economists use models like diagrams and equations which are built with assumptions. Just like my model in third grade simplified the solar system, economic models attempt to simplify reality in order to better understand it.





Semoga artikel Some introductory economics for the armchair economist bermanfaat bagi Anda. Jika kamu suka dengan artikel Some introductory economics for the armchair economist ini, like dan bagikan ketemanmu.