We do various activities related to economics in our daily lives without realizing it. We make different decisions to perform different tasks such as what, why, where, how to buy something and how much we need.
We use economics from our houses to workplaces but do not exactly know what economics is.
Do you want to know economics and branches of economics?
If yes, your search ends here, because in this blog we will tell you about economics and its branches along with the reasons why we use them.
Economics is a broad subject that deals with the proper allocation of resources within society. Different Branches of economic focus on the different aspects of our life.
This word(Economics) comes from two Greek words “eco + nomos” where eco implies “home” and “nomos” refers to accounts. Economics evolved gradually and concerns about keeping the family accounts into today’s wide-range subject.
What is Economic
There are various definitions of economics, but simply you can understand it by analyzing how people utilize resources.
Economics may be known in a few several ways. Mainly this is the study of poverty, learning of how people utilize resources and respond to incentives, or the decision making study. It regularly includes subjects like finance and wealth, but not all about money. Economics is a wide system that helps us to know historical trends, make predictions about the new year or, understand today’s headlines.
There are two main branches of economic: microeconomics and macroeconomics.
Microeconomics- The knowledge of individual Choice is called microeconomics.
Macroeconomics- The knowledge of the economy as a whole is called macroeconomics. The macroeconomics might concentrate on sovereign debt. As a microeconomics might concentrate on families’ medical debt.
Difference Between Microeconomics and Macroeconomics
Production Theory- It deals with the process of turning inputs into outputs and the study of production.
Demand- Demand helps to determine the prices of goods in the market with the help of the supply and demand theory.
Production Cost: It implies that the resources’ cost evaluates the price of goods and services.
Labor Economics- with the help of labor economics, we get to know about the wages pattern and income, etc. We need to study labor economics to understand the dynamics and functioning of the wage labor market.
Interest Rates: Interest rates go higher when inflation is higher and vice versa. With the surge in the price level, each currency unit can purchase fewer products and services than before by implying a reduction in the currency’s purchasing power.
People intend to protect their investment’s returns in a period of high inflation, so they demand higher interest for excessive funds.
Exchange Rate- Higher inflation in a country as compared to another country brings currency depreciation.
Unemployment- The rate of unemployment and rate of inflation in an economy share an opposite relationship. A stable short-run trade-off is predicted between inflation and unemployment.
Branches of economic
Although microeconomics and macroeconomics are the major branches of economics, we will also discuss other branches associated with the different aspects of these fields.
This branch of economics considers the foundation of modern economics. this branch is founded by David Ricardo, Adam Smith. This is based on.
- The activity of free markets. How the undetectable hand and market instrument can empower an effective portion of assets.
- The economics work most productively when government intercession is insignificant and worried about the security of private property, the advancement of international commerce, and restricted government spending.
- classical economics matters perceive that a government is required for giving open products, for example, law and order, defense, and education.
Neoclassical economics was founded by Willian Jevons, Leon Walrus, John Hicks, and George Stigler. This branch is built on the foundation of the free-market related to classical economics. Some ideas include.
- Rational choice theory
- Marginal analysis
- Utility maximization.
Neo-classical economics is also known as orthodox economics. It also publish in many textbooks as the economics is the teaching starting point.
The creation of this branch is by John Maynard Keynes, Paul Samuelson. Keynesian financial aspects was develop during the 1930s against a background of the Great Depression. The current monetary conventionality was at a misfortune to clarify the tenacious financial downturn and mass joblessness. Keynes proposed that business sectors neglected to clear for some reasons (for example mystery of frugality, negative multiplier, low certainty). In this way, Keynes upheld government intercession to launch the economy.
Keynesian financial matters are acknowledged with making macroeconomics as a particular report. Keynes contended in which the total economy may work together in different manners to singular markets and various principles and strategies requests.
Environmental economics/welfare economics
This branch was generated by E.F Schumacher, Arthur Pigou, Garrett Hardin. this gives importance to the environment and includes.
- market Failure Public goods, external benefits, common tragedy, external cost.
- neoclassical analysis of external benefits and external coast.
- Questioning whether economic growth is really good in environmental economics.
It includes or concerned with the issues of underdevelopment in poorer and poverty issues in countries. main peoples are Simon Kuznets and Amartya Sen and W. Arthur Lewis who creates this branch. This branch relates to both Micro and Macro Economics. Some issues involve.
- Third world debt
- Increasing capital investment
- Trade vs aid
The main person is Knut Wicksell who leads this branch. Focusing on wages, labor markets and labor employment. labor economics relates and starts from neo economics premise. Recently there are some changes made in this labor economics that affect non monetary factors.
Key people: Jan Tinbergen
Utilization of information to discover basic connections. Econometrics utilizes measurable techniques, relapse models, and information to predict the result of economic approaches. For instance, Okun’s law recommends a connection between economic development and unemployment.
This branch of economics examines the science behind economic decision making and activity. It examines the limitations of the opinion of individuals and is perfectly rational. The main members are Amos Tversky, Gray Becker, Daniel Kahneman, Richard Thaler. Some factors include.
- Irrational Vitality- a person gets out of asset bubbles.
- Bounded Rationality- Individuals have choices by thumb rule.
Other Branches of Economics
Monetarist economics got its acceptance in the 1970s and 1980s decade that was the high time of inflation. It was a reaction to the prominence of Keynesian economics at the post-war time.
Monetarists believed that Keynesian fiscal policy did not match the Keynesian expectations and was less effective than he suggested. Milton Friedman and Anna Schwartz introduced monetarist economics that promotes previous classical ideals, for example, belief in market efficiency.
The key people associated with this branch are Ludwig Von Mises, Carl Menger. This branch of economics is concentrated on state intervention and price controls.
Austrian economics is free-market but criticizes elements of classical economics that have greater importance on the individual’s value and actions. According to Austrian economists, the value of goods represents the marginal utility of goods rather than labor inputs.
Marxist Economics is dominated by Karl Marx underlining the unstable and unequal nature of capitalism. It focuses on searching different approaches to elementary economics questions rather than depending on the free-market advocate, state intervention, planning, and distribution of resources.
To conclude, economics is not all about money and how we use it, but also considers a long list of topics such as income, employment, allocation of resources, various indexes, etc.
Economics is a broad area of study where different branches deal with different types of issues and focus on a different market. In this blog, we have discussed the various branches of economic with their area of concentration. I hope now you are familiar with the economics term and its branches.
Frequently Asked Questions
Who is known as the father of economics?
A Scottish economist, author, philosopher “Adam Smith” is known as the father of modern economics.
What are the other branches of Economic?
- Institutional Economics
- Chicago Economics
What are the types of Economics?
Economics is mainly of two types: Free-market and command economy. But when these economies are combined, it becomes a mixed economy.
Free-Market Economy: All the financial decisions are made by businesses and individuals. Examples- Hong Kong, New Zealand.
Command Economic: Only central power can make all economic decisions, such as in Cuba and North Korea.
Mixed Economy: When some decisions are made by the government and some are by individuals and business people is known as a mixed economy. Examples are France, India.