Business & Finance Economics

The Definition of Economics - Gaining A Better Understanding Of How The Economy Works

Knowing the definition of economics doesn't mean anything as far as having a good understanding of how the economy works.
In capitalism, the economy works because its rules coincide with the rules of human nature.
Therefore, when anything interferes with these laws business growth will be squelched and the economy is stifled.
This article explains.
The Merriam Webster dictionary defines economics as follows: "A social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.
"In other words, goods and services are traded for money and economics studies these relationships.
To some degree, everyone probably knows this definition.
Still, this does nothing to help one's understanding of what makes an economy good or bad.
This takes a deeper understanding of economics.
Replace Myth with Economic Facts One problem many people have is understanding why certain goods and services cost what they do.
Many people think a company has total control over the prices it charges and if somebody's prices are higher than customers think they should be they believe the company is somehow evil or simply there to exploit them.
This is not true and believing so can lead one down the wrong path entirely.
A case in point would be the oil companies.
There are people who believe oil companies are full of greedy obnoxious uncivil people who are simply out to make life difficult for them.
The truth of the matter is oil prices are set in the commodities market.
Sellers of gasoline bid how much they will pay for a gallon of gas.
Bear in mind the minimum amount they can bid on is 42,000 gallons.
As gasoline becomes more in demand or scarcer, these gasoline sellers tend to bid the price up.
Selling Gas The gasoline sellers take delivery on the gasoline for the price they have bid on and the price at the pump is usually about twice the price.
This has been a consistent for the last 100 years.
The price a gallon of gas has been marked up is due to the cost of delivering the gas and another large portion of this markup is actually just money the gasoline sellers are collecting for taxes.
Truly, the gasoline seller makes about $.
24 a gallon these days.
The point is, if no one wanted gasoline or if there was a much more abundant supply of gasoline, its price would fall.
Gasoline sellers would not have to bid as high as they do now if gasoline were easier to come by.
In no part of the gas pricing process does the seller say let's just go screw the customer.
It just doesn't happen.
In my opinion, we in the United States should be drilling for oil where we believe there are reserves and we should also be drilling off of our own shores.
A larger supply of gasoline will make a gallon of gas worth less.
However, as we continue down the road of preventing our own companies from conducting their business through our foolish regulations, we move our country closer and closer to bankruptcy.
In fact, we have to ask ourselves if these politicians who are stopping our oil companies from drilling are motivated by their want of bankrupting our economy so they can move it away from a capitalistic system and replace it with communism.

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