In this essay, it is my objective to be able to illustrate the importance and significance of economics in our daily lives. The Internet was mostly used as assistance in completing this essay. Also, the information here are gathered and reviewed from various Internet web pages and textbooks which can be found in the list of references at the end of this assignment.

To begin with, I shall start with the definition of economics. There is no exact definition of economics as it varies from the opinions among economist. However, many have chosen to agree with Alfred Marshall, a leading 19th century English economist, that economics is “a study of mankind in the ordinary business of life; it examines that part of individual and social action …show more content…

Similar to unemployment, inflation can incur adverse consequences. Inflation occurs when there is an increase in the general level of prices. It does not mean that the price is high but rather that they are increasing.

Next, microeconomics focuses on the behaviour of individual businesses and households and on specific product and resource markets. It tends to be more scientific in its approach, and studies the parts that make up the whole economy. It analyses certain aspects of human behaviour. Microeconomics shows us how individuals and firms respond to changes in price and why they demand what they do at particular price levels. One of the parts that make up the whole economy is called households. A household is made up of a person living alone or a group of related or unrelated persons occupying a house, an apartment or any other housing unit.

All of us belong to a household and in order to get by each day, we are required to spend money. Most of the spending that we do comes from the income that we earn and to earn income we sell our labour. Every household’s income differs with gender, age, or education of the head of the household. But what is the use of income? Basically, households use their incomes for three purposes: spending, saving and paying taxes. Usually more than half of the income usually goes to spending and the rest goes to saving and paying taxes.

Another sector which is studied in microeconomics is the business sector. A business is an