Intro to Economics - Crash Course Econ 1
Economics is not just a study of money or the stock exchange.
Economics is the study of people and their choices.
And this is based on two fundamental assumptions of Economics.
- Opportunity Cost
You could be doing one thing but you are choosing to do something else. In that sense, you believe that doing one is a better use of your time than another. Therefore, your opportunity cost of one is greater than another.
Scarcity means there is a limited supply of resources.
Economics is when people make choices. When a college student decides to pick major A over Major B.
Many people believe that if you just put more money into healthcare, it would improve. But in many cases what we need is the right incentive. So, economics is also a study of incentives.
For example, you could provide the college with an incentive on the number of enrollments. But then college would play it to just enroll.
Then you modify it to incentivize the number of graduates, then you suddenly have colleges just passing people or lowering difficulty or only admitting smart kids.
So, it’s very important to get incentives right. Because wrong incentives can backfire.
Most economists are in Microeconomics. Whether to launch the business snow or later? What to do when a competitor does x?
Macro is the study of a Nation and its decisions like inflation, unemployment, etc.
Both Governments and the Free Market support each other. One can’t function without the other.
There is always an opportunity cost. If you don’t want road accidents, you could remove all cards from the road. But you understand the opportunity cost and decide one is better than the other.