5 COMMON MISCONCEPTIONS ABOUT ECONOMY
Economy is a zone of production, distribution, and trade. It is a consumption of goods and services by different participants. Economics is the study of how societies use scarce resources for the production of valuable commodities and their distribution among people. Without the economy, our society cannot work in order. We deal with economics every day whether it is selecting goods or services. But, here the 5 common misconceptions about economy people have:
#1. Economics(study) is not linked with stock markets, money, or the way of business. Economics is a social science that leads to better understanding and prediction of human interaction. On the other hand, business and finances which has the focus to manage a business organization and investing money in a way to earn the highest return for investors.
#2. Capital does not means “financial capital” in economics. Capital is a produced goods that are tools, machinery, equipment, and physical infrastructure that used to produce goods or services.
#3. Moving from an inefficient amount of production to an efficient amount of production is not an economic growth. If an economy can make two goods: brownies and breads. If half of brownies machines are not being used. So, they are not using all of their resources. If then, they use all of those brownies machines, they are not acquiring more resources (which means economic growth). Therefore, they are moving to another point of the Production Possibility Curve.
#4. Self-sufficiency does not direct towards strive in the global economy. Individuals or nations who try to produce everything themselves are like to end up with more economic instability. So, specialization in trade makes a country rich.
#5. Demand does not mean the quantity of goods demanded in the market. Demand only changes when its determinants changes (price, income, related goods price, consumer preference, and consumer expectations). Quantity demanded of a good is the number of goods needed in the market. When the demand for a good increases, it will be desired at every price.