Limitation of Economics

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‘‘ECONOMICS is a science which studies human behaviour as a relationship between ends and scarce means that have alternative uses.’’- By Lionel Robbins, an economist in an attempt to define Economics. Lionel considered the study of economics to be a social science that concerns itself with the investigation of how man maximizes his satisfaction from the limited resources at his disposal and not forgetting the fact that these available limited resources can be channelled into the production of other goods. ‘‘An ECONOMY consists of the economic system of a country or other area, the labour, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution and consumption of goods and services of that area.’’- According to Wikipedia (an online encyclopaedia) in defining an ECONOMY. This implies that an ECONOMY is the sum total of all commercial activities including buying, selling, distribution, among others. The relationship between ECONOMICS and an ECONOMY (or economies) is that ECONOMICS aims at explaining how an ECONOMY (or economies) works and how economic agents (i.e. Individuals, households, firms, and the government) interact. ECONOMICS is seen as a tool for analysis because it carefully examines human behaviour in relation to the market or how an economy works to aid individuals to have better understanding of economic events. Economists analyse a problem in three (3) major steps. First, there is observation of a phenomenon and the problem is formulated. All other things being equal, when price of a commodity increases, quantity demanded decreases and vice versa. One may decide to know and understand what this relationship is and why it even exists. Secondly, a theory or a model is developed to capture the phenomenon and also simplify the phenomenon to aid easy understanding and work of the economist. By considering the change in price and its effect on quantity demanded, one tries to ascertain the...
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