Money can be used toward the consumption of goods and services produced by organizations that have a specific combination of labor (workers) and capital (machines and tools necessary for production). In welfare systems, for example, money is usually transferred from those who have it to those who don’t, to provide for basic needs, such as shelter or food. However, sometimes money is given away freely, through a process called money transfer. In essence, money is the measurement of what society owes you, usually as a result of your labor. Indeed, among the most important elements of economics is the way in which money makes economic systems function. In fact, economic theories have been used to describe a whole host of phenomena.Īnd while interesting, we shouldn’t neglect the most important application of economics: studying the economy. However, since one has already qualified for the next tournament, it’s rational for him to lose on purpose to increase the odds that his friend advances. If you’ve ever read the book Freakonomics (as many millions of people have) then you’ve seen the variety of ways that economics can be applied to situations not directly related to “the economy.”įor example, the book’s authors attempt to explain why sumo wrestlers might cheat by using the economic theory of rational choice, which assumes that each person’s decisions are calculated to produce the best possible outcome.īut why would a sumo wrestler cheat? Imagine that two sumo wrestlers are facing each other in a match.
Moreover, you’ll get a crash course on the specific mechanisms that shape economic behavior, and gain the knowledge necessary to examine a country’s economic health.
With an in-depth look at the history of economics, you’ll better understand how our society has been sculpted by its laws and practices. In this book summary, you’ll learn how economics molds our lives and how it has also changed over the last few centuries. Yet economics is more than just a bunch of boring numbers – it plays a critical, intimate role in our day-to-day lives.įrom the clothes on your back to the screen on which you’re reading this text – literally everything we interact with – is the result of a series of economic transactions that end with a product in your hands. Did you snooze through your economics class in college? You’re probably not alone.
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