KNOW THE DIFFERENCE BETWEEN ECONOMICS VS. FINANCE

OVERVIEW

Both economics and finance are terms related to similar backgrounds. Possibly this is the reason why one term is confused with another. This article is an attempt to differentiate between finance and economics. Though both the terms are related to money matters, there are certain lines that differentiate finance from economics.

ECONOMICS

Economics is the study of the market and non-market components related to money. It involves the study of the market, its components, its predicted behaviour based on the global economic trends at the micro level. It also encompasses the study of greater financial institutions and global economic regulators and their functions. 

FINANCE

Finance on the other hand deals with matters solely related to money management. It encompasses the raising, management and investment of finance. It also deals with the ways to raise finances and their optimization.  Apart from this general distinction, there are certain parameters that are taken into account to distinguish economics vs. finance. These are the parameters that will be considered to compare economics and finance.

COMPARING ECONOMICS VS FINANCE

• Applications:

Finance is applied to manage financial resources for a company or venture. It deals with the ways and methods of raising finance to procure resources for the company. It allows planned investment of procured resources and appropriate distribution of equity.

   Economics on the other hand is the aggregate study of market and market forces. It analyses market behaviour and makes predictions of future events based on the general trends in the past. It is elemental in planning the course of economic activities during different phases of the economic cycle. It facilitates optimum utilisation of resources and helps in coordinating supply with demand.

• Branches:

When talking about finance, there are basically three prominent branches in finance. These are namely public, corporate and personal finance. Public finance basically deals with the financial matters of the state. It is concerned with the larger public interest and is governed through policy decisions.

In economics, there are two subcategories. These subcategories are macroeconomics and microeconomics. Macroeconomics deals with the entire economy. It studies the elements vital in running the larger economies that vary from regional to the global level. Microeconomics on the other hand deals with the smaller and fundamental elements that govern the market. These fundamental elements form the basis of economic functioning.

• Courses:

There is a range of courses offered by both the courses. Both economics and finance offer quite popularly opted and highly demanded courses. This segment discusses some of the most widely opted courses from economics and finance orderly.

COURSES IN ECONOMICS

• Info economics– information economics deals with economic aspects related to the information field. It offers varying learning and job opportunities to individuals.

• Development economics– In third world countries, development economics plays a vital role in the growth and development of underdeveloped economies.  Development economics focuses on socio-economic developmental aspects of the economy.

• Microeconomic principles– Microeconomic principles are the founding principles of economics. It analyses market forces, demand and supply, prices and factors affecting these elements in the long and short run. 

• Public policy– Economics in public governance is the study of public policies and their implications on the economy. It analyses the nature of economic public policies, their impact on growth and the rise of the economy.

• Behavioural economics– It deals with the psychological aspect of the economic behaviour of the people in varying circumstances. It plays a significant role in understanding the aggregate behaviour of the market in times of ups and downs in the economic cycle.

COURSES IN FINANCE

• Finance MBA– an MBA in finance is a very popular course among the masses. It offers wide-ranging job opportunities in the corporate sector. Finance MBA can be applicable to jobs regarding taxation, investment, financing etc. All the jobs in the sector offer decent pay to the employees.

• Public accounting– knowledge in the field of accounting, tax management and auditing of finances constitutes the work of public accounting. It basically involves offering accounting services to other ventures. 

• Financial risk management– Firms in the market are exposed to a series of risks including credit risk, investment risk, exchange, legal risks and risks related to market reputation and image of the firm. The study of financial risk management involves the study of financial risk mitigation and prevention. It is a preferred course due to its demand in every large and small firm.

• Management accounting– The study of management accounting comprises techniques to manage risks, plan for the business strategies and manage other significant finance-related elements of the firm. It involves control and coordination of diverse but related elements in the financial sector.

• Investment counselling– choosing a course in investment counselling involves advising clients on investment-related aspects. The advice tendered in financial matters should be well understood and free from possible financial risks. Investment counselling provides a safeguard against the possible risks to the capital invested and promotes wider investments.

• Ease of learning:

Finance involves the general management of financial resources, while economics involves the application of complex math concepts like calculus. So it can be held that learning economics is harder than finance owing to the usage of mathematical concepts. While this is true for any average student, ease of learning also depends on the interest of the learner. Someone having sound knowledge of higher mathematics combined with an interest in economics can effortlessly learn economics.

CONCLUSION

Belonging to the market-related concepts both finance and economics are two diverse disciplines. Both disciplines provide different services for the functioning of the market. While comparing Economics vs. Finance, various aspects of both streams have been unearthed. One can now easily choose the subject that best suits their interests and natural capabilities.