The study of the production, distribution and consumption of both goods and services is called economics. What economists do is to try to understand the economy and how it responds to the many factors that would influence it.
The concept of modern economics started in 1776. This was the year Adam Smith’s landmark work Wealth of Nations was published. Smith’s work was the first complete defense of the free market. Up to now, it still remains as one of the most influential publications on economics. It is so influential that other schools of thought on economics were largely abandoned when Smith’s work appeared.
One of the pillars of Smith’s work is the concept of “invisible hand.” This concept describes the idea that the market may look chaotic but in actuality, it is guided in order to make just the right amount and variety of both goods and services. If there is a lack of goods, economic incentives will happen in order to produce more. If there is an excess of goods, then economic incentives will happen to produce less goods or different types of goods.
Economics is such a vast field of study that it branches off into different schools and methods of analysis. But the two main methods of economics are macroeconomics and microeconomics. Macroeconomics deals with the study of economies in aggregate, while microeconomics deals with the study of the individual factors or agents that are a part of the economy. Economists have been able to formulate market theories that have been able to reflect what happens in both the macro and micro levels of the economy.