People depend on a lot of things to survive. Since prehistoric times, people have been making shelter, tools, and clothes. Most of these goods are not sufficient. Their production takes time that cannot then be used for other activities or not available in sufficient quantities in order to meet the needs of the people.
Self-sufficient people even would be forced to make economic decisions as a result of this scarcity. This is why has been popular.
What is the subject of economics?
Economics deals with the problem of scarcity from a macroeconomic perspective. The most important sub-areas are micro and macroeconomics.
Microeconomics analyzes the behavior of individual private households or companies. It examines economic decision-making – for example using utility functions, whereby a striving for the greatest possible benefit or profit is assumed – and their effect on macroeconomic relationships.
Macroeconomics combines the individual economic subjects into whole sectors such as “private households”, “companies”, “state”, and “abroad”. It deals with macroeconomic relationships and variables, such as the total demand of all households, employment, or national income.
Because of the close proximity of economics, which used to be referred to as economics, to political issues, it has repeatedly drawn great thinkers from science, politics, and moral philosophy under its spell over the past centuries.
What does the history of economics show?
The economic theories can often only be understood if one takes into account the specific social issues that economists have addressed from the late 17th century to the present day.
Since the beginning of economics, the most diverse economic ideas and models have been devoted to solving the problem of scarcity. The history of their origins is closely linked to the prevailing political, social, and economic conditions. Dealing with specific problems gave decisive impulses for the further development of economics and influenced practical action through new findings and suggestions for solving the problem of scarcity.
Why is the market not coping with unemployment?
The reasons for this lie in the behavior of companies and consumers. The classical economists had assumed that the wage rate regulates supply and demand on the labor market, while the interest rate matches the investments of companies with the savings necessary for financing.