General Concepts of Economics

The history of the science economics is replete with radical shifts in perception among economists. Contemporary economists, for example, are starting to become more interested in the seemingly irrational components of individual and institutional economic behavior. In their bestselling book "Freakonomics," economists Steven D. Levitt and Stephen J. Dubner use several innovative and nontraditional concepts in an attempt to account for human economic choices. Despite these shifting attitudes, certain core concepts remain important to the field.
Market

The concept of a market is foundational to the science of economics. "Market" can refer to the totality of all human exchanges and transactions or to particular collection of individual consumers willing to purchase a product or good. The contemporary notion of a market can also connote a physical or digital meeting place for potential buyers and potential sellers (such as grocery stores and stock exchanges). Supply and Demand o The concepts of supply and demand are used to predict stable price points for goods and services. Supply is the quantity of goods or services that buyers in a market are willing to produce at a given fixed price. Demand refers to the quantity of goods or services that sellers are willing to purchase at a given fixed price. The classical law of supply and demand states that in any given market, prices will stabilize so that the amount of a product being produced is roughly equal to the amount of a product being consumed. Scarcity o Scarcity is a core concept in economics used to explore the limited nature of all natural and man-made resources. Scarcity helps economists observe and predict the relationship between product availability and product value. Many high-priced items such as diamonds and other precious stones are naturally scarce. The relationship between supply, demand and scarcity is complex and depends upon a number of environmental factors. Interdependence o Interdependence is a result of scarcity. Because not all resources are abundant, individuals must interact with others to secure sustenance, safety and material comfort. Interdependence promotes markets because people seek out those with the resources or expertise necessary to fulfill needs they cannot fulfill themselves. As the world becomes increasingly globalized, individuals are able to reach beyond the bounds of the traditional nation-state and participate in international markets to fulfill their needs and desires. Consumer Choice o Consumer choice is a concept used by economists to observe the link between individual patterns of behavior and larger economic patterns. Harvard University economist Dr. Alvin Roth suggests that key decision-makers exert a great influence on the choices consumers make. His research suggests that people manage market institutions can drive consumer choice by constructing the very options available to them, based on market rules and procedures.
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