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As someone who's never formally studied economics, considering a career in commercial law has led me to realise just how little I know and understand about economics. This was a problem for two reasons:

• first, as an aspiring solicitor, there's no way to truly have commercial awareness without understanding commerce (for which you need to understand money); and
• second, a lack of knowledge about economics impeded my ability to understand global and national events, and the ways they’d affect me directly.

To remedy this, I've been looking into some key economic concepts to provide myself with a springboard, off which I can then launch greater legal understanding. So, if, like me, you're an aspiring solicitor with little to no understanding of economics, I present to you: economics: an (absolute) beginner's guide.

Definition

As usual, in typical English student fashion, let's start with a dictionary definition and some helpful etymology. ‘Economics’ is defined as a study into the production, consumption and transfer of wealth, goods, and services. It stems from the Greek word 'oikonomika', which is actually the name of a treatise by Aristotle. 'Oikonomika' later took on the meaning of household management (which is probably why –‘being economical’ sometimes denotes frugality).

Why is this relevant to law? Law, particularly commercial law, sits at the centre of every sector. So, changes to a certain field will affect lawyers working in this field. This is especially true for the economy, which affects not only the work lawyers do, but also how much work they have to do. 

So, what are some key economic concepts you can use to build a better understanding of the bigger picture, and how it’ll affect you as an aspiring (and eventual) solicitor?

Financial markets

A financial market, like a regular market, is a (virtual) space where trading occurs. Examples include the stock and bond markets, which you've no doubt heard a lot about on the news. These markets operate by creating liquidity for businesses and governments − making it easy for buyers and sellers to trade their assets (eg, shares and currency). This allows borrowers to borrow money from the markets, and investors to invest. The point of these markets – at least, as far as I’ve understood – is to allow for economic activity and the flow of money. Markets provide finance for companies to expand, as well as financing governments globally.

As a solicitor working in the commercial sphere, you'd no doubt come across situations involving markets in some way through your client. Even if they aren't directly involved in trading, fluctuations in financial markets still indirectly affect lawyers by catalysing economic disruptions (eg, recessions). This would, in turn, affect you not only as a lawyer (eg, by affecting your client's business), but also as a citizen.

The concept of supply and demand

One of the most famous economic concepts is supply and demand − something that affects everyone, everywhere. The principles of supply and demand are placed in opposition to one another. In most instances, as prices rise, supply increases (suppliers are incentivised to produce more) while demand declines as consumers aren’t willing to purchase the same quantity of a product for a higher price. The same is true in reverse; that is, as prices drop, supply is reduced while demand increases.

‘Price elasticity’ is the extent to which changes in price result in changes to demand and supply. If something has an inelastic demand, this means that the level of demand for the product isn’t very responsive to changes in price (ie, a 10% increase in price might only lead to a 1% decline in demand for an inelastic good) − basic necessities, for instance, are likely to have an inelastic demand.

Supply and demand of a company's product are therefore affected by factors, including:

• the competitiveness of the company’s industry;
• consumer income and preferences;
• how necessary the product is; and
• whether a product can be substituted for alternatives.

So, if you're looking into competition law, the economic principle of supply and demand would underpin the kind of work you’d do with a business client. Commercial solicitors would also have to take this principle into account when dealing with a commercial client because the client's ability to market and sell their product or service would be related to both its demand and present supply. Thus, by understanding supply and demand, you can better understand the factors affecting your commercial clients − as well as their consequences.

The concept of costs and benefits (cost-benefit analysis)

‘Cost-benefit analysis’ is the idea that when making economic decisions, people want to maximise the benefits and minimise the costs. It's effectively a fancy way of describing the mental pro-con list you make when considering whether to buy the fancier or less fancy toothpaste at the supermarket.

This economic principle describes this kind of analysis as one of the motivating factors determining why consumers make certain choices (eg, why they choose one company over another or why one product sells better than another).

As a solicitor, for example, you’d engage with this concept directly when helping your client come to decisions about the appropriate action to take. For instance, as a corporate solicitor or a solicitor working in insolvency, if your client consulted you about acquiring another company, you’d have to consider whether the benefits outweigh the costs, on both an economic and general level.

In conclusion, while knowing some of these principles isn't going to automatically get you a training contract, or provide you with some magical knowledge of exactly how everything works, I hope it's provided you with some puzzle pieces that make approaching the bigger picture seem a little less intimidating.