What is economics?

Economics comes from the greek word oikonomos, which means “one who manages a household”. Economies, like households, have limited resources like labour, capital and time that are used in the production, distribution and consumption of goods and services used to maximize one's utility.

This can look like spending money to purchase ingredients needed in the production of meal in a home and the parts needed in the production of a laptop in a factory. The distribution of a parent’s time with each of his children to help them individually with their homework in a household and the distribution of aid when there is a flood in a community. The consumption of water to operate a data centre and the consumption of soda pop by individuals at a large scale in a district. Each decision produces an outcome and each outcome it achieved by a decision in resource allocation intended to improve the well-being of economic actors like individuals, households, firms and countries. In other words, to make individuals, households, firms, regions and countries better off.

Economists take aim at the heart of this phenomena to examine how and why economic actors manage their scarce resources.

This insight helps to understand why things are the way they are and can inform economic actors to change, maintain or improve their decision-making. By understanding the process of decision making we can achieve better outcomes like producing a cost effective and delicious dinner, advancing to the next frontier in laptop technology, building confidence in a student learning a new skill, delivering the right aid, in the right amount at the right time to a flooded neighbourhood, optimizing the water consumption of a data center to ensure its sustainability in the future, reducing soda pop consumption to tackle obesity across a region. 

These illustrations are examples to show the scale of decision making at the microeconomic and macroeconomic level. Microeconomics studies on the decision making process of individuals, households and businesses and macroeconomics focuses on the economic activity at in aggregate, at a large scale, like an entire district, country, region or the global economy. I will go into both in more detail in my next blog posts but for now I encourage you to answer this question for yourself: what is economics?

Source: Encyclopaedia Britannica - Encyclopaedia Britannica, 1842 edition