Economics

Beginner

Economics is the study of how people, businesses and governments make choices about using limited resources to satisfy their wants and needs.

Resources such as time, money, land, labour and raw materials are limited, while human wants are almost unlimited. Economics studies how societies decide what to produce, how to produce it and who gets it.

It is usually divided into two main branches. Microeconomics looks at individual decisions, such as how a household chooses what to buy or how a company sets its prices. Macroeconomics looks at the economy as a whole, including growth, inflation, unemployment and interest rates.

Economics provides tools that apply across finance. Ideas such as supply and demand, opportunity cost, incentives and trade-offs help explain why prices change, why interest rates rise, why some businesses succeed and how government policies affect people's lives.

For example, when the price of petrol rises, economics helps explain why people drive less, buy more fuel-efficient cars and why businesses that depend on transport may raise their prices. Understanding basic economics makes financial news and personal money decisions much easier to follow.

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