Economics is broadly divided into two principled components:

Microeconomics

This component focuses on studying the fundamental economic agents – Individuals and Firms.

It explains how these economic agents behave or react when faced with decisions on expenditure of monies, and investment of savings.

Macroeconomics

It looks at the economy as an organic whole, and the interactions among the economic agents.

It concentrates on factors such as interest rates, inflation, and unemployment. It also encompasses the study of economic growth and the methods governments use to try to moderate the harm caused by the highlighted factors on other economic agents.

DEFINITION OF BASIC ECONOMIC TERMS

Needs - any good or service that is fundamentally necessary for survival, such as food, clothing, and shelter.

Wants - are often distinguished from needs. A need is something that is necessary for survival, while wants are things that a person would like to have. Some economists have rejected this distinction and maintain that all of these are simply wants, with varying levels of importance.

Scarcity- Any situation in which people do not have enough resources to satisfy all of their wants. The phenomenon of scarcity is what creates the need for economics.

Supply- The total amount of a certain type of good that has been produced and is available.

Demand - The whole range of quantities that a person or group with a given income and preferences demand at various prices.

Economic Models are usually simplified, often mathematical, frameworks designed to illustrate complex processes. They represent theoretical construct, outlining economic processes by a set of variables and the logical and/or quantitative relationships between them.

M1:S3 - The Components of Economics

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