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What Is Economics?

By Yann, published on 11/07/2018 We Love Prof - IN > Academia > Economics > An Introduction To Economic Theories

Economics is a broad area, with a lot of concepts and ideas that can be difficult at first to come to terms with. Below we introduce common theoretical concepts and areas in economics that you may see during your economics studies.

Fundamental Concepts in Economics

Economics is a hugely important subject. It can help us to understand why individuals and companies make the decisions they do, and it can also be used to predict how an economic system, whether local and domestic, will grow or contract over the coming years.

Although economics is more of a best guess than an absolute science, its insights are both interesting and relevant. As a result, it’s unsurprising that so many students choose to study economics in some shape or form, whether that is at A-Level at school or as an undergraduate or master’s degree at university.

Having said that, when you first start studying economics, one of the main hurdles that students encounter is how to get to grips with the sheer number of economic terms, models, and theories there are, and what the implications of a particular theory or term have on an economic system.

Although, as we will see below, there are some core areas within economics, namely microeconomics, and macroeconomics, there are subsets of economics which you may come across in your studies at school or university, for instance, international or developmental economics.

Besides these core areas of economics, there are also a number of economic concepts and ideas that any budding students should have a handle on.

The fundamentals of economics include topics such as:

  • Incentives, which can have a huge influence on how much demand there is for goods or services;
  • Money, which underlines economic transactions;
  • Productivity, which can be used as an empirical measuring tool to see how economies are performing, for better or worse; and
  • Technology, which has influenced consumer behaviour and the amount of information available about goods or services, and has spurred economic progress, with the Industrial Revolution being one famous example.

If you find that you need help mastering some of these core terms and concepts in economics, then you could look for some outside help in the form of an economics tutor. Superprof has a variety of economics tutors, who can provide one on one tuition, as well as tuition in groups or online, in order to help improve your skills in economic analysis.

Money is a fundamental economics concept. Money is a core economics concept. (Source: CC BY-SA 3.0, Nick Youngson, Alpha Stock Images)

What is Macroeconomics?

Macroeconomics is considered to be one of two major areas within economics, alongside microeconomics.

Macroeconomics is considered to be the study of an economy in the whole and as such advocates a “top-down” approach to economic study.

The history of modern macroeconomics can be traced back to John Maynard Keynes, a British economist who was hugely influential during the early 20th century with his theories, including the idea of “boom” and “bust” economies.

Although people, both at the time and in later years, argued against Keynes’ ideas, for example, the Austrian-British economist Friedrich August von Hayek, Keynes has remained a popular figure in the world of economics, and his ideas have been developed into new schools of thought, including the post-Keynesian school.

Keynes had many ideas and theories, but one of the most enduring theories is that the economy is influenced largely by aggregate demand. As a result, Keynes was a strong advocate of government spending, particularly in times of economic downturn, in order to help stimulate the economy and promote economic growth.

Although Keynes is considered the modern founder of macroeconomic thought, there’s a lot more to learn about macroeconomics besides Keynes.

Crucially, macroeconomics studies key areas that influence the economy in the aggregate, including:

  • Employment or unemployment levels in a country, or globally;
  • Market failures and their consequences;
  • Fiscal policies in place around the world; and
  • The rate of inflation.

For this reason, macroeconomics can also play a crucial role when it comes to formulating a framework for economic policy. Indeed, economists that work for government bodies may find themselves examining macroeconomic factors within the country in order to understand and evaluate which economic policies would be most beneficial to the country, and economy, as a whole.

Economic policies that are likely to have been impacted by macroeconomic analysis include:

  • The rate of corporation tax in effect for current and future years;
  • Measures that are designed to improve employment rates and employment stability across the country; and
  • Inflation measures and policies in place.

While macroeconomics has a huge role to play in the study of economics, any economics student also needs to understand the field of microeconomics, and how it interacts with macroeconomics, to have a fuller picture of what the study of economics entails.

Tax can be significant in terms of economic concepts. Tax is a feature within macroeconomics and can be one of the crucial economic topics in this area. (Source: CC0 1.0, 3dman_eu, Pixabay)

What is Microeconomics?

While macroeconomics looks at the performance of the economy in aggregate, microeconomics looks at the economy from a “bottom-up” perspective.

One of the crucial figures behind the study of microeconomics is Alfred Marshall, who was a prominent economist during the 19th century.

The area of microeconomics remains a hugely significant area in the study of economics. Economists that specialise in this area will look at topics as diverse as:

  • Influences on supply and demand;
  • Fluctuations in employment levels; and
  • Production and manufacturing efficiency.

However, that’s not to say that there aren’t other areas within the field of economics that are seeing increased attention. In particular, another school of thought, known as behavioural economics, including behavioural finance, is gaining increased focus, as it sets out to challenge traditional economic schools of thought.

In particular, behavioural economics appears to contradict one of the key tenants of classical theory and neoclassical economics. Namely, behavioural economists argue that man does not inherently make economically rational decisions. This contradicts the views of classical and neoclassical economists, who tend to create economic models on the basis that human beings do make rational decisions.

Although these areas are fascinating to study, areas such as microeconomics and macroeconomics will likely remain highly relevant in economics courses over the coming years, so it’s imperative that any economics students are comfortable with microeconomics as a field.

If you’re currently studying economics, but find yourself struggling with key macroeconomic or microeconomic topics and theories then you may benefit from hiring an economics tutor to help you improve on areas where you need some extra focus or more explanation.

Economics tutors can provide you with extra questions and examples that supplement your work in class while providing you with the motivation you need to help boost your academic performance. Superprof, for instance, has a range of economics tutors that are happy to answer any questions you have on macro- or microeconomic topics, whether those questions are in relation to taxation, monetary policy, or laissez-faire economics.

You can research economic topics online. Behavioural economics is an economic theory that argues that individuals don’t always make rational economic decisions. (Source: CC0 1.0, Clker-Free-Vector-Images, Pixabay)

International Economics

International economics may not be as well studied as macroeconomics and microeconomics, but it is a highly relevant, and popular, area of economic study in its own right, with its own share of economic problems to solve.

Like many areas of economics, international economics is in some respects an interdisciplinary area of study, as international relations is at the forefront of the study of international economics.

For instance, if a nation opts for punitive economic sanctions or trade policies towards a particular country, then the result of such policies would be a likely increase in international political tensions in the long run. Conversely, favourable trade policies may help bolster or sustain existing international relations.

Students that specialise in international economics and/or international relations can enjoy a range of career opportunities when they graduate from university. For instance, graduates in international economics could look for a role at:

  • An international organisation, such as the WTO;
  • A newspaper as a financial journalist;
  • A governmental body, examining economic policy or analysing an economic model.

If you’d like to learn more about international economics, you can always reach out to a tutor at Superprof. Superprof has tutors that specialise in a number of subjects, including politics and economics, so there will be a tutor on hand to answer any questions you may have.

Equally, if you do enlist the help of a tutor, then you can help ensure that you improve your understanding of economic theories as much as possible. Whether you would like to learn more about classical economics, the business cycle, or the core principles behind free-market capitalism, an economics tutor can help answer your questions and leave you more confident in your economics studies.

If you enter your postcode on the Superprof website, then you can be matched with tutors in your local area, as well as tutors that would be happy to provide tutoring services online. This gives you the flexibility to choose how you would like your tuition delivered, and how often.

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