Understanding Economics: Micro, Macro, and Key Concepts

The economy is a social science that studies how to administer scarce resources to satisfy the needs of individuals and collectives. It focuses on the production and distribution of goods and services for consumption among members of society.

Microeconomics studies the behavior of individual units such as families and companies, and their interrelationships. For example, it examines the demand and supply of a product and its price. Macroeconomics, on the other hand, studies the behavior of the global economic system in variables such as aggregate employment, investment, and general price levels. Its objective is to obtain a simplified view of the economy as a whole, allowing us to understand and act on the level of economic activity within a country or group of countries.

Positive Economics seeks objective explanations of economic phenomena and deals with what is or could be. Normative economics, in contrast, focuses on the objectives to be achieved by economic activity, either in terms of individual actions or what the state should do.

HUMAN ASSETS: These require human intervention to make them fit for consumption.
Durable Goods: These can meet needs for a certain period of time, such as a stove or a car.
Non-durable goods: These meet a need and cannot be reused. Example: food.
Real estate: These can be consumed or used only in the economy where they are produced, due to transport costs or barriers to entry and exit. Capital goods: These are the real machines or facilities used in the production of consumer goods.

The term scarcity is relative, as each country has different needs that depend on its resources to satisfy them.

Free goods are those for which there is enough to satisfy all individuals, such as air.

Economic goods are those that are useful, transferable, and scarce. Economic assets have different classifications, such as: capital, tangible and intangible, intermediate, and final consumption (durable and non-durable).

Services: These are activities that directly or indirectly aim to satisfy human needs without creating material objects.

The factors or resources are basic elements used in the production of goods and services. These are called factors of production and are classified into three groups: land, labor, and capital. They need to be coordinated by a company to produce goods and services.

Land refers to natural resources, and its payment is called rent.

Labor is the basic productive factor and refers to the workforce, both skilled and unskilled. Its remuneration is called wages.

Capital: Fixed capital refers to financial assets, and its payment is called interest.

Political economy: This includes normative principles such as liberalism and other doctrines that are based on ideology.

Political economy refers to the means by which the government tries to regulate economic affairs or modify practices within a nation. Economic policy is the result of a political process in which different interest groups maneuver to achieve their goals.

Opportunity cost: This is the value of other assets that must be sacrificed to acquire another property.