Economics, by definition, is the study of wealth and resources. It can help us answer questions about everyday things like the price of bananas or jeans but also address big, global issues like inflation rates and wealth inequalities. Economics is an interdisciplinary field that applies math and analytical skills to real-world problems.
In this guide, we’ll cover:
- Economics Definition
- Types of Economics
- Economics Industries
- How to Get Into Economics
- Pros and Cons of Working in Economics
Economics Definition
What is the definition of economics? Economics studies the production, distribution, and consumption of wealth and goods. Economists determine how resources should be used by analyzing data and researching trends.
For example, let’s say company X sells $20 sweatshirts that cost $10 to make. Because these sweatshirts only cost $10, they aren’t high-quality and aren’t selling. Applying economics can help company X understand whether investing more in its production and increasing its sweatshirt price would help sell more sweatshirts.
A more well-known example of economics is supply and demand. Let’s say raspberries are in season, so there’s a higher supply. A seller will decrease the price of their raspberries to help sell them before they go bad. When raspberries aren’t in season, the seller can drive the price up because they don’t have as much supply. Using economic theories and forecasting, the seller can adjust prices to ensure no excess supply.
Economists help businesses, international organizations, government agencies, and more use their resources efficiently by analyzing financial data and economic trends.
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Types of Economics
There are two main types of economics: microeconomics and macroeconomics.
Microeconomics
Microeconomics studies individuals’ and businesses’ economic decisions and how those decisions affect resources. For instance, what happens if a running gear store raises the price of its shoes? Will consumers still buy them, and if so, how many? Economists who work with businesses use microeconomics to help forecast outcomes and advise economic decisions.
Macroeconomics
Macroeconomics is the study of the economy as a whole. In this kind of economics, economists look at large-scale factors like inflation, unemployment, and national income. Their goal is to see how the economy is performing as a whole, why it’s performing the way it is, and how it can improve.
Economics Industries
While “economist” is a common title in economics, an economist’s work varies based on what industry they work in.
For example, an economist who works for a federal government agency might be focused on the U.S. unemployment rate and examine how previous national policies might have contributed to the current economic situation. On the other hand, an economist who works for a corporation will likely focus on sales and help the business maximize its profit.
Other economic industries include:
- Management consulting
- Technical consulting
- State and local government
- Scientific research
- Public health
- Finance
- Insurance
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How to Get Into Economics
Education
Education is of the utmost importance in economics; most economists have advanced degrees, either a master’s or Ph.D. To start, you’ll need a bachelor’s degree in a related field, either in economics or business and math. Your master’s and doctoral degrees should be in economics and will require both courses and work experience.
Skills
You might think economics is all about analyzing data and applying math skills. And while these skills are foundational to economics, economists also need soft skills to put their work in context and communicate their findings.
“Systems thinking is key to being a good economist,” Dennis Shirshikov, former adjunct professor of economics at the City University of New York and strategist at awning.com, says. “You also need to be comfortable with being wrong since that happens quite frequently as well. In general, you’ll want to be easy going and unattached to a specific viewpoint since looking at things from multiple perspectives is important.”
Required skills include:
- Analytical skills: to analyze economic data and historical trends
- Forecasting: to predict market trends and economic outcomes
- Critical thinking skills: to apply logical thinking and solve complex economic problems
- Math skills: to handle data, models, and graphs with advanced math skills like statistics and calculus
- Writing skills: to help communicate and present findings to colleagues and clients, or, sometimes, to the media
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Pros and Cons of Working in Economics
Pros of Economics
- A variety of industries: Some economists work in health care, others in education, and others for businesses. You can apply this skill set in multiple fields.
- Impact: Your work as an economist has the potential to change how people make financial decisions, and if you work for a governmental organization, you could have an impact on policy.
- Lucrative: The average annual salary for an economist is $120,830 as of May 2021, according to the U.S. Bureau of Labor Statistics. “As a Ph.D. in a quantitative field, you can make a significant amount of money on Wall Street then retire to working as a professor at a local university,” Shirshikov says.
Cons of Economics
- Training and education: Most economists hold advanced degrees and go to school and gain experience for years before landing a job in the field.
- Stress: Economics can be a high-pressure job that requires you to work over 40 hours a week.
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