Economics is a social science that deals with the life-cycle of goods and services. It is a study of how innovation and finance revolve around human needs and desires to provide products and services to the public. Understanding economics is critical to business success.
Supply and Cost
Economics has an enormous effect on the daily lives and wallets of all people, even if they aren't actually involved in economic studies. The principles of supply and demand play out everyday for every person making purchasing decisions on goods and services, and in keeping or finding a job. Changes in circumstances or government mandates on any aspect of an industry creates a ripple effect of price changes through multiple industries to the end consumer.
When the consumers' confidence in the economy is low, they restrain spending, starting with dining out and going to the movies. These industries have wage workers that lose income when hours are cut due to reduced business. Soon everyone feels the pinch, from fewer open retail check-out lines to fewer police on the streets.
Debt and Spending
CNN Money reports that consumer spending fuels two-thirds of the United States economic activity, much of which was based on credit prior to 2008. The 2008 to 2009 financial collapse led banks to tighten consumer lending, and consumers began paying down debt rather then spending as usual. Reducing personal debt is good on the individual level, but this reaction also kept employment in a slump and reduced the disposable income of households and individuals.
- BasicEconomicsInfo: Supply and Demand
- CNNMoney: Consumer Confidence Ticks up in October (2010)
- RasmussenReports: Discover ® Consumer Spending Monitor (SM) Rises 1.8 Points in October
- BusinessInsider: The New American Consumer is Terrified of Debt Even as the Economy Grows
- McClatchy: A Year After Financial Crisis, the Consumer Economy is Dead
- Noel Hendrickson/Digital Vision/Getty Images