What We've Learned in Economics

Companies , firms , and businesses  are all organizations that sell widgets. The terms are generally interchangeable, but usually, firms are considered to be more long-term. There are several types of firms: S ole proprietorships  are where one person runs the firm. If that person dies, the company falls apart, unless they have a successor - however, the next generation still usually screws the company over. Partnerships are where two people run the firm. Limited liability corporations  (LLC) are where in the eyes of the law, you're separate from your business; people can sue your business, but not you. You can sell the business to someone else because the business is separate and has rights - there's legal protection, as opposed to when selling sole proprietorships or partnerships. An LLC can be just one person, or a multinational corporation. When thinking about firms, you should also think about economies of scale  and factors of production . Economi...

Trade is exchanging one widget (product or service) for another. When making a trade, one needs to be thinking about  profit . Profit is equal to the price of a widget minus the cost it took to make that widget. You can also think about it like this: Price = cost + profit. Companies need to sell widgets for more than they cost to make, because they need to make a profit. They maximize their happiness  mostly by maximizing their profit . A consumer surplus  is the amount of money that is saved when consuming  items. To consume an item means to use it up, not necessarily by eating it. Money is saved  when an item costs less  than expected or advertised, or is put on sale due to being unpopular or out of season. If consumers have extra money, they spend it; by spending it, they are consuming more. A producer surplus , on the other hand, is when producers have too many of a widget. They must sell these items to make a profit. Producers should maximize ...

It's no secret that people want to be happy. This means that they will make decisions based on what will make them happy, whether it's in the long run or the short run. Everybody wants to be happy and maximize their own happiness. But their own happiness is different for everyone. Someone can maximize their happiness by making choices and opportunity costs. If they are choosing between a red car and a blue car, they might choose the blue car because that is what makes them the most happy. In that instance, the red car is the option foregone; therefore it is the opportunity cost. Even if you don't make a choice, you're still making a choice - and your choice is to save the decision for he future. When trying to maximize your happiness, there are a couple things you need to keep in mind. Spending  is what you choose to spend your money on. Whatever you choose to spend your money on, that's your priority , which means it's what's most important to you....

What does it mean for something to be scarce ? The dictionary definition of scarce says "insufficient to the demand," but the meaning in Economics is slightly different. In Economics, when something is scarce, it means that it is not plentiful  and not distributed evenly.  An example of this would be oil. If something is rare , however, then it is very uncommon . An example of a rare resource would be rare Earth minerals. Finally, in order for something to be considered limited  in Economics, it must be not infinite.  A limited resource would be solar energy. All resources are limited in some way. Time and money are both limited. There is a finite amount of money in the world, and although it may seem like some people have a lot, their money is not unlimited. Everything is made out of something, and everything is limited. That fact raises the question "what should we use resources for?" This is when we must begin thinking about opportunity costs . ...

Is Economics a science? In order to answer that question, we must first understand what "science" is.  Science is " the intellectual and practical activity encompassing the systematic study of the structure and behavior of the physical and natural world through observation and experiment." But what are the types of sciences? Hard Sciences Follow laws Replicable results Biology, chemistry, physics, etc. Social Sciences Do not follow laws Results are not replicable (people are squirrely) Psychology, sociology, etc. Economics is not consistent - that is to say it doesn't follow laws and it isn't replicable. It depends on people, and people are squirrely. This means that Economics is not a hard  science. Instead, it is a social  science. Just like there are two types of sciences, there are also two types of Economics. Macroeconomics Larger scale State, regional, and national The whole economy, overall Difficult to go on a hi...