3. What is the economy?
What is the economy?

What is the economy?

Economy; is a human activity that consists of trade, distribution, and consumption, import, and export. Two main units unite the economy. These are supply and demand.


Demand is the general name given to the goods that customers need and want. Supply is the offering of certain services or products. The main purpose of consumers in the market is to supply their needs and wishes in the best and cheapest way. Law of demand is a claim the quantity demanded of a good falls when the price of the good rises other things equal.

These two units are based on laws. The law of supply and demand. The law of demand states that when all other factors are equal, the higher the price of a good, the less people will demand that good. The Law of supply is a claim that the quantity supplied of a good rises when the price of good rises other things are equal. So the law of supply says ıf price goes up also quantity goes up and other things are equal. Of course, supply and demand are not always two units in balance. for example supply surplus. Supply surplus means ıf quantity supplied is more than the quantity demand this situation calls supply surplus. For example, there are 200,000 people wants Adidas sneaker in Europe. And Adidas produces 250,000 sneakers for Europe. This 50,000 sneaker is a supply surplus. However, there are places where supply and demand are equal. There is one level for the price curve. Price must reach this level for equilibrium. On this level quantity supplied equals to quantity demanded. We call this level as an equilibrium price. We can shift demand and supply curves in a lot of different ways. We should look at ınput prices technology sellers and expectations for the supply curve. Input prices go down supply curve shifts to the right because sellers make more profit. Technology provides cost savings so supply curve shifts to right. If the seller number is increase curve also shifts to the right. But it is different in expectations. Some sellers put their goods in the inventory. Because of that curve shifts to the left. For the demand curve we should look at buyers, income, related goods, tastes, and expectations. All situations shift the demand curve to the right. But in expectations demand curve shifts to the left. One of the important things in the economy is the opportunity cost. 

Opportunity cost means to increase the production of any goods by one unit another is the amount of goods or earnings required. Firms are manufacturers. Opportunity cost comes with decisions on both sides. (manufacturers and consumers) . For example: If the consumer has only 1 dollar in his pocket and he chooses water if he is hungry and thirsty the opportunity cost of the water will be cake. This situation is the same in manufacturers. If the manufacturer chooses aluminum instead of iron for source the opportunity cost of aluminum is iron. If the producer wants to increase aluminum product number per unit.

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