Economics Abbreviations

What is Economy?

Economics is a science that studies the processes of production, distribution, accumulation and consumption of material goods. It’s the containment or moderation in spending, it’s a savings.

In the figurative sense, economy means control to avoid waste in any service or activity.

The word “economy” derives from the junction of the Greek terms “ oikos ” (house) and “ nomos ” (custom, law) resulting in “rules or administration of the house, the home”.

The concept of economy encompasses the notion of how societies use resources to produce valuable goods and the way in which these goods are distributed among individuals.

Scarcity of resources suggests the idea that material resources are limited and that it is not possible to produce an infinite amount of goods, given that human wants and needs are unlimited and insatiable.

Based on this principle, economics observes human behavior as a result of the relationship between human needs and the resources available to satisfy those needs.

Economic science tries to explain the functioning of economic systems and the relationships with economic agents (companies or individuals), reflecting on existing problems and proposing solutions.

The investigation of the main economic problems and decision-making are based on four fundamental questions about production: “What to produce?”, “When to produce?”, “How much to produce?”, “For whom to produce?”.

Microeconomics and macroeconomics are the two major branches of economics. Microeconomics studies the various forms of behavior in the individual choices of economic agents, while macroeconomics analyzes microeconomic processes by looking at an economy as a whole.

Market economy

Market economy is an economic system in which organizations (banks, companies, etc.) can act with little interference from the state. It is the proper system of capitalism.

Subsistence economy

It is an economic system based on the production of goods exclusively necessary for basic, immediate consumption. Where there is no surplus in production, nor an economic relationship with other producing markets.

What is Microeconomics?

Microeconomics is the study of individual and particular economic behavior, ignoring the overall economy, but focusing only on specific markets and the actions of producers and consumers.

Also known as the Theory of Prices, this is the part of Economic Sciences that studies the phenomenon of price formation for consumer goods and services, as well as production factors, from the analysis of specific markets and the behavior of units of consumption (individuals, families, etc.).

In order to be able to explain how the final prices of products are generated, microeconomics is based on some principles, with “supply and demand” being one of the main ones.

Based on the Principle of Rationality – every producing agent will seek to maximize its profits – it is concluded that the greater the demand for a certain product, for example, the higher its price may be. On the other hand, if supply exceeds demand, then theoretically the value of the respective product tends to decrease.

Individual demand is understood as the amount of a given consumer good and/or service that the consumer would be willing to consume within a certain period of time. However, it is noteworthy that in this case the demand is interpreted as the “desire for consumption” and not its actual fulfillment.

To study the variations between supply and demand, microeconomics is based on three main theories:

• Consumer Theory:analyzes consumer preferences, choices, limitations in relation to values, and determines the market demand for a particular product/service.
• Company / Firm Theory:studies the economic structuring of companies that aim to produce for consumers, taking into account market demand. The offer of products is now adjusted according to the number of consumers who are willing to consume the product/service.
• Production Theory:consists of the study of the transformation of raw materials into final consumer goods of companies. It also determines the costs of firms during this process and which, consequently, will reflect on the volume of supply and price of the final product.

Microeconomics and Macroeconomics

Macroeconomics is a branch of Economic Sciences that studies the economy in a broad sense, analyzing the global economic aspects of a society or nation, disregarding the particularities of its members (individuals).

Microeconomics, as seen, is an area of study that addresses the opposite of macroeconomics, as it aims to analyze particular and individual economic behavior, focusing mainly on producers and consumers within a specific market.

List of Acronyms Related to Economics