Sean Masaki Flynn

People have to make choices because of scarcity, the fact that they don’t have enough resources to satisfy all their wants. Economics studies how people allocate resources among alternative uses.Macroeconomics studies national economies, and microeconomics studies the behavior of individual people and individual firms.

The worldwide Great Recession of 2007 to 2009 began in the economy when a housing bubble in the United States popped in 2006. Trillions of dollars had been invested in the financial markets on the premise that residential housing prices would never decline significantly.As the bubble burst and home prices began to plummet, the economy took a hit as dozens of large banks as well as many hundreds of financial firms were threatened with bankruptcy.

When the economy encounters a negative demand shock, price flexibility (or lack of flexibility) determines both the severity and length of any recession that may result. If prices were infinitely flexible — if they could change within seconds or minutes after a shock — the economy would immediately move from Point A to Point C, and all would be right with the world.

A wonderful thing about free markets and competition in the economy is that output is produced at the lowest possible cost. This fact is extremely important because it means that free markets are as economically efficient as possible at converting resources into the goods and services that people want to buy.In addition, markets save society a lot of money because they produce efficiently without requiring human intervention.

Offering “free” healthcare, reduced-cost care, and health insurance all have drawbacks for the economy. However, Singapore has managed to create a set of medical institutions that delivers world-class healthcare while somehow spending 50 percent less than Canada and 70 percent less than the United States. Keep reading to find out their economic secret.

For simplicity, economists often assume that people are fully informed and totally rational when they make decisions. You may think that gives people way too much credit, but economic models based on those assumptions work surprisingly well much of the time.However, in the real world, people aren’t always informed about the economic decisions they need to make, and they aren’t always as reasonable as economists assume.

Here is a list of ten economic ideas that all informed people should understand and be ready to use to evaluate the policy proposals made by politicians, pundits, and the media. Some of these ideas aren’t true in all situations, but because they’re usually correct, be wary if some guy wants you to believe that they don’t apply to a particular situation.

There is always discussion of bubbles and how they develop in the economy. Bubbles typically have a significant impact on the economy and economists often discuss the causal factors and outcomes of these events. Debt contracts, such as bonds and mortgages, are promises to repay particular amounts of money. When negotiating such contracts, lenders normally believe that those to whom they’re lending will be able to repay — or else lenders wouldn’t extend the loans.

To an economist, the terms profit and loss refer to whether the revenue from selling a firm’s output is bigger or smaller than the costs that must be incurred to produce that output. If the revenue exceeds the costs, the firm is running a profit, whereas if the costs exceed the revenue, the firm is running a loss.