Relationship of economics to other field studies

Economics - Fields of contemporary economics |

relationship of economics to other field studies

A multidisciplinary field, political science draws from some other social sciences, including sociology, economics, psychology, and anthropology. Sociology. Sociology studies social life and human interactions, from how groups form to how. In this article we will discuss about the relationship of economics with other applied mathematics, operational research, and some areas of management and . Economics - Fields of contemporary economics: One of the principal subfields work of monetarism, criticized Keynesian fiscal measures along with all other . of labour”—that is, by the relationships of production and by consumer demand.

The slope of the curve at a point on it gives the trade-off between the two goods. It measures what an additional unit of one good costs in units forgone of the other good, an example of a real opportunity cost.

Thus, if one more Gun costs units of butter, the opportunity cost of one Gun is Butter.

relationship of economics to other field studies

Along the PPF, scarcity implies that choosing more of one good in the aggregate entails doing with less of the other good. Still, in a market economymovement along the curve may indicate that the choice of the increased output is anticipated to be worth the cost to the agents. By construction, each point on the curve shows productive efficiency in maximizing output for given total inputs.

relationship of economics to other field studies

A point inside the curve as at Ais feasible but represents production inefficiency wasteful use of inputsin that output of one or both goods could increase by moving in a northeast direction to a point on the curve.

Examples cited of such inefficiency include high unemployment during a business-cycle recession or economic organization of a country that discourages full use of resources. Being on the curve might still not fully satisfy allocative efficiency also called Pareto efficiency if it does not produce a mix of goods that consumers prefer over other points. Much applied economics in public policy is concerned with determining how the efficiency of an economy can be improved.

relationship of economics to other field studies

Recognizing the reality of scarcity and then figuring out how to organize society for the most efficient use of resources has been described as the "essence of economics", where the subject "makes its unique contribution.

Specialization is considered key to economic efficiency based on theoretical and empirical considerations. According to theory, this may give a comparative advantage in production of goods that make more intensive use of the relatively more abundant, thus relatively cheaper, input.

Even if one region has an absolute advantage as to the ratio of its outputs to inputs in every type of output, it may still specialize in the output in which it has a comparative advantage and thereby gain from trading with a region that lacks any absolute advantage but has a comparative advantage in producing something else. It has been observed that a high volume of trade occurs among regions even with access to a similar technology and mix of factor inputs, including high-income countries.

This has led to investigation of economies of scale and agglomeration to explain specialization in similar but differentiated product lines, to the overall benefit of respective trading parties or regions. Among each of these production systems, there may be a corresponding division of labour with different work groups specializing, or correspondingly different types of capital equipment and differentiated land uses.

More total output and utility thereby results from specializing in production and trading than if each country produced its own high-tech and low-tech products. Theory and observation set out the conditions such that market prices of outputs and productive inputs select an allocation of factor inputs by comparative advantage, so that relatively low-cost inputs go to producing low-cost outputs.

In the process, aggregate output may increase as a by-product or by design. A measure of gains from trade is the increased income levels that trade may facilitate. Supply and demand The supply and demand model describes how prices vary as a result of a balance between product availability and demand.

The graph depicts an increase that is, right-shift in demand from D1 to D2 along with the consequent increase in price and quantity required to reach a new equilibrium point on the supply curve S. Prices and quantities have been described as the most directly observable attributes of goods produced and exchanged in a market economy.

In microeconomicsit applies to price and output determination for a market with perfect competitionwhich includes the condition of no buyers or sellers large enough to have price-setting power. For a given market of a commoditydemand is the relation of the quantity that all buyers would be prepared to purchase at each unit price of the good.

Demand is often represented by a table or a graph showing price and quantity demanded as in the figure. Demand theory describes individual consumers as rationally choosing the most preferred quantity of each good, given income, prices, tastes, etc. A term for this is "constrained utility maximization" with income and wealth as the constraints on demand.

Here, utility refers to the hypothesized relation of each individual consumer for ranking different commodity bundles as more or less preferred. The law of demand states that, in general, price and quantity demanded in a given market are inversely related. That is, the higher the price of a product, the less of it people would be prepared to buy other things unchanged. As the price of a commodity falls, consumers move toward it from relatively more expensive goods the substitution effect.

In addition, purchasing power from the price decline increases ability to buy the income effect. Other factors can change demand; for example an increase in income will shift the demand curve for a normal good outward relative to the origin, as in the figure. All determinants are predominantly taken as constant factors of demand and supply.

Supply is the relation between the price of a good and the quantity available for sale at that price. It may be represented as a table or graph relating price and quantity supplied. Producers, for example business firms, are hypothesized to be profit maximizers, meaning that they attempt to produce and supply the amount of goods that will bring them the highest profit.

Supply is typically represented as a function relating price and quantity, if other factors are unchanged. That is, the higher the price at which the good can be sold, the more of it producers will supply, as in the figure. The higher price makes it profitable to increase production. Just as on the demand side, the position of the supply can shift, say from a change in the price of a productive input or a technical improvement. The "Law of Supply" states that, in general, a rise in price leads to an expansion in supply and a fall in price leads to a contraction in supply.

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Here as well, the determinants of supply, such as price of substitutes, cost of production, technology applied and various factors inputs of production are all taken to be constant for a specific time period of evaluation of supply. Market equilibrium occurs where quantity supplied equals quantity demanded, the intersection of the supply and demand curves in the figure above.

At a price below equilibrium, there is a shortage of quantity supplied compared to quantity demanded. This is posited to bid the price up. At a price above equilibrium, there is a surplus of quantity supplied compared to quantity demanded.

This pushes the price down. The model of supply and demand predicts that for given supply and demand curves, price and quantity will stabilize at the price that makes quantity supplied equal to quantity demanded.

Similarly, demand-and-supply theory predicts a new price-quantity combination from a shift in demand as to the figureor in supply. For a given quantity of a consumer good, the point on the demand curve indicates the value, or marginal utilityto consumers for that unit.

relationship of economics to other field studies

It measures what the consumer would be prepared to pay for that unit. The price in equilibrium is determined by supply and demand.

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In a perfectly competitive marketsupply and demand equate marginal cost and marginal utility at equilibrium. Their usage rates can be changed easily, such as electrical power, raw-material inputs, and over-time and temp work.

Other inputs are relatively fixed, such as plant and equipment and key personnel. In the long runall inputs may be adjusted by management.

These distinctions translate to differences in the elasticity responsiveness of the supply curve in the short and long runs and corresponding differences in the price-quantity change from a shift on the supply or demand side of the market.

Marginalist theorysuch as above, describes the consumers as attempting to reach most-preferred positions, subject to income and wealth constraints while producers attempt to maximize profits subject to their own constraints, including demand for goods produced, technology, and the price of inputs.

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For the consumer, that point comes where marginal utility of a good, net of price, reaches zero, leaving no net gain from further consumption increases. Analogously, the producer compares marginal revenue identical to price for the perfect competitor against the marginal cost of a good, with marginal profit the difference.

relationship of economics to other field studies

At the point where marginal profit reaches zero, further increases in production of the good stop. For movement to market equilibrium and for changes in equilibrium, price and quantity also change "at the margin": Other applications of demand and supply include the distribution of income among the factors of productionincluding labour and capital, through factor markets.

In a competitive labour market for example the quantity of labour employed and the price of labour the wage rate depends on the demand for labour from employers for production and supply of labour from potential workers.

Labour economics examines the interaction of workers and employers through such markets to explain patterns and changes of wages and other labour income, labour mobilityand un employment, productivity through human capitaland related public-policy issues. It can also be generalized to explain variables across the economyfor example, total output estimated as real GDP and the general price levelas studied in macroeconomics. Economic theory may also specify conditions such that supply and demand through the market is an efficient mechanism for allocating resources.

Theory of the firmIndustrial organizationBusiness economicsand Managerial economics People frequently do not trade directly on markets. Instead, on the supply side, they may work in and produce through firms. The most obvious kinds of firms are corporationspartnerships and trusts.

According to Ronald Coasepeople begin to organize their production in firms when the costs of doing business becomes lower than doing it on the market. In perfectly competitive markets studied in the theory of supply and demand, there are many producers, none of which significantly influence price. Industrial organization generalizes from that special case to study the strategic behaviour of firms that do have significant control of price.

It considers the structure of such markets and their interactions. Common market structures studied besides perfect competition include monopolistic competition, various forms of oligopoly, and monopoly. It draws heavily from quantitative methods such as operations research and programming and from statistical methods such as regression analysis in the absence of certainty and perfect knowledge.

A unifying theme is the attempt to optimize business decisions, including unit-cost minimization and profit maximization, given the firm's objectives and constraints imposed by technology and market conditions. Information economicsGame theoryand Financial economics Uncertainty in economics is an unknown prospect of gain or loss, whether quantifiable as risk or not. Economics and Political Science: Economics interacts with almost all other academic disciplines. Economics has various things common with political science.

For example, in both subjects we teach public finance, financial relations between the centre of the study as also the economics of planning. Economics and Decision Sciences: All of these disciplines deal with how individuals and groups make decisions. As a decision science, economics is closely related to business and management courses. One major function of an economist is to conduct research.

The job of the company economist is to investigate economic aspects of various decisions Government agencies and private business firms generate a vast array of economic statistics on such matters as income, employment, prices and expenditure patterns. A two-way street exists between statistical data and economic theory. Statistics can be used to test the consistency of economic theory and measure the responsiveness of economic variables to changes in policy.

At the same time, economic theory helps to explain which economic variables are likely to be related and why they are linked. Statistics do not tell their own story.