College and University > Business > Economics Videos
Our modern world relies on money, trade, and resources in order to thrive. Since resources and money are limited, these have to be managed effectively. This is the purpose of economics: to manage the world's limited resources to fill in people's wants and needs.
A basic principle in economics is that wealth is limited. However, wealth can be created, consumed, and transferred. Economics deals with these processes and how each process works in detail. Also, it has the complicated job of making sure that there is enough wealth to satisfy what everyone wants. Since people don't have any limit to their wants, economists have a very tough time distributing wealth in ways that are favorable to the most number of people.
One principle that drives most of economics is the law of supply and demand, and how this affects price. Basically, supply and demand have an inverse relationship on how they influence price: when demand is low and supply is high, prices go lower. On the other hand, when demand is high but supply is low, prices tend to go higher. Prices "go back to normal" when supply and demand are close to each other.
Companies use the law of supply and demand to their advantage. As producers, they can manipulate the supply of their products in the market to control the price. The higher the price, the more money they make. Some businesses intentionally do this to gain more profits.
To prevent abuses like this, economists also work on the macro scale. This is why the government taxes businesses and implements monetary policies. These policies ensure that it is not only the businesses who amass wealth. It is the government's job to also ensure that wealth is used to provide the basic needs of its citizens, such as education, healthcare, and housing.
