Economics as defined in the text is 'the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society'. (Colander, 5th Ed) Encarta defines economics as 'the study of production, distribution, and consumption of goods and services'. So basically economics is how to produce something people want, whether it is a tangible item or a service to them. This study however is not as cut and dry as it may sound, for humans are fickle and finicky by nature.
The study of economics and be divided into microeconomics and macroeconomics. Macroeconomics is the study of the entire economy in a society. It takes into consideration the rate of inflation, business cycles, business growth and the rate of unemployment. Microeconomics is the study of individuals and how their choices influence the flow of the economy. For example, the price of gas in California is about 10% higher than the national average. California is one of the largest states in the USA in population and land. Californians choose to drive everywhere and mostly alone, causing the demand for petroleum in the state to rise immensely which increases the supply.
The Law of Supply states that the amount of product supplied increases as the prices increase as long as other factors are constant, and vice versa, if supplies decrease so will the prices. The Law of Demand states that the amount of product demanded rises as the prices fall or prices rise when the amount of product demanded falls so long as all other factors are equal.
An article on Gasoline Supply and Demand by Reuters on August 28, 2006 discusses the price increases due to supply and demand of petroleum in the United States.
Due to the way Americans are used to living their lives and their every day habits, the demand of gasoline has increased. The United States' inability and/or refusal to refine oil within the country created a demand for the...
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