is the social science that analyzes the production, distribution, and consumption ofgoods and services.
analyzes the production, distribution, and consumption of goods and services. It aims to explain how economies work and how economic agents interact.
The term economics comes from the Ancient Greek οἰκονομία (oikonomia,"management of a household, administration") from οἶκος (oikos, "house") + νόμος (nomos,"custom" or "law"), hence "rules of the house(hold)". Current economic models emerged from the broader field of political economy in the late 19th century. A primary stimulus for the development of modern economics was the desire to use an empirical approach more akin to the physical sciences
Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social institutions, war, and science. At the turn of the 21st century, the expanding domain of economics in the social sciences has been described as economic imperialism.
Common distinctions are drawn between various dimensions of economics. The primary textbook distinction is between microeconomics, which examines the behavior of basic elements in the economy, including individual markets and agents (such as consumers and firms, buyers and sellers), and macroeconomics, which addresses issues affecting an entire economy, including unemployment, inflation, economic growth, and monetary and fiscal policy. Other distinctions include: between positive economics (describing "what is") and normative economics (advocating "what ought to be"); between economic theory and applied economics; between mainstream economics (more "orthodox" dealing with the "rationality-individualism-equilibrium nexus") andheterodox economics (more "radical" dealing with the "institutions-history-social structure nexus");and between rational and behavioral economics.
An economic system is the combination of the various agencies, entities (or even sectors as described by some authors) that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed economy is shown in the flow-diagram.
The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, various economic decisions must be made to allocate resources efficient.
When we talk of scarcity within an economic context, it refers to limited resources, not a lack of riches. These resources are the inputs of production: land, labor and capital. People must make choices between different items because the resources necessary to fulfill their wants are limited. These decisions are made by giving up (trading off) one want to satisfy another.
The decision-making structures of an economy determine the use of economic inputs (the means of production), distribution of output, the level of centralization in decision-making, and who makes these decisions. Decisions might be carried out by industrial councils, by a government agency, or by private owners. Some aspects of these structures include:
▪ Coordination Mechanism: How information is obtained and used to coordinate economic activity. The two dominant forms of coordination include planning and the market; planning can be either centralized or de-centralized, and the two mechanisms are not mutually exclusive. ▪ Productive Property Rights: This refers to ownership (rights to the proceeds of output generated) and control over the use of themeans of production. They may be owned privately, by the public, by those who use the property, or held in common by all of society. ▪ Incentive...