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What is Economics?

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WHAT IS ECONOMICS? COMPETITION

Earlier this year, the School of Economics ran a competition which posed the question 'What is Economics?' It was open to High School students, asking them to creatively communicate their understanding of Economics.

Click here to read more, and see some of the excellent entries!

Economics investigates human behaviour and its consequences in a world with scarce resources. Families, businesses and society face the same problems. There is so much we want to do, but not enough time and  resources to do everything on the list; so we make choices.  Economics is about how and why we make the choices that we do.

Economics is a way of understanding our society and community and how they interact to form "The Economy".  It offers insight into the ways in which businesses are structured and compete, and the ways in which people interact and make decisions.

Economics provides a framework for decision making by considering the criteria we use to meet challenges in terms of costs and benefits and how to measure them. It also addresses how best to design the institutions that take decisions on our behalf and how to ensure that the decisions are 'good' from a social viewpoint.

An economist examines the role of markets in making decisions, when and how markets are regulated and the role of the government. An economist addresses issues such as:
  • Will an increase in taxes stimulate the economy?
  • Will a fall in the value of a currency cause interest rates to rise?
  • What causes inequality in the distribution of wealth?
To answer these macro, or community, questions, the economist has to understand decisions made at the micro, or individual level, including:
  • How do people and firms react to economic incentives such as goods and prices, taxes, different legal rules or market structure?
  • What does this imply for the wellbeing (welfare) of people?
Microeconomic principles are applied to the analysis of many issues, such as:
  • What happens when the sale of certain drugs is made illegal?
  • Commercial pressures leading to species extinction
  • Power generation and pricing
  • The pricing of commercial fishing licenses
  • The control of pollution
  • Why do concerts become ‘sell-outs’?