In this essay, it is my objective to be able to illustrate the importance and significance of economics in our daily lives. The Internet was mostly used as assistance in completing this essay. Also, the information here are gathered and reviewed from various Internet web pages and textbooks which can be found in the list of references at the end of this assignment.
To begin with, I shall start with the definition of economics. There is no exact definition of economics as it varies from the opinions among economist. However, many have chosen to agree with Alfred Marshall, a leading 19th century English economist, that economics is “a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.” In other words, it also means that economics is a study of how in our daily lives certain actions or decisions are related to the acquisition and usage of material requirements in our daily routines. Additionally, economics is the study of how scarce or limited resources are used accordingly to satisfy people’s unlimited wants and needs. It is concerned with how people make decisions in a world of scarcity. In short, if there is no scarcity there would be no point in studying economics.
Perhaps one of the most fundamental concepts of economics is demand and supply. It is because of demand and supply that we are compelled to make choices as generally demand is great but at the same time we are lacking in supply. Firstly, demand refers to how much or the quantity of a product or service that is desired by buyers. The quantity demanded is the amount of a product that people are willing to purchase at a certain price; the relationship between price and quantity demanded is known as the demand relationship. If we were to look closer there is a Law of Demand which states that holding all nonprice factors constant, as a product’s price increases, the quantity of the product demanded decreases and as a product’s price decreases, the quantity of the product demanded increases. (Refer to Graph 1 in the Appendix to see an example of a demand curve.)
Secondly, supply represents how much the market can offer. It is defined as the different amounts of a good or service that a seller would make available for sale at different prices in a given period. The quantity supplied regards the amounts of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Like the Law of Demand, there is also a Law of Supply which holds the definition that holding all nonprice factors constant, the quantity of a good or service that a supplier is willing to offer on the market relates directly to price. Meaning that as the price increases, the quantity supplied increases as well. The reason for this is because sellers’ would prefer to sell more at higher prices so that they can cover costs and at the same time earn a profit. (Refer to Graph 2 in the Appendix to see an example of a supply curve.)
Another concept of economics which partly encompasses demand and supply is monopoly. Based on economics context, a monopoly is a market structure in which there is only one producer or seller for a producer or service. In other words, the single business is the industry. Entry into such a market is impossible and highly restricted due to high costs or other impediments which may be economic, social or political. For instance, Tenaga Nasional Berhad b(TNB) is an example of a company which holds a monopoly on electricity generation, transmission and distribution in Peninsular Malaysia. It is impossible for new sellers to enter into the market as they would not be able to obtain permission to operate from the respected authority.
Monopoly is one of the two extreme...
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