Definition Of Economics

Submitted By Vraelan
Words: 532
Pages: 3

Economics is the study of the efficient use of limited resources in the production of goods and services in order to satisfy unlimited economic needs and wants.

Economic perspective is a viewpoint where people make rational decisions by comparing benefits and costs marginally. It includes three elements:
Scarcity/choice - Resources can only be used for one purpose at a time. Definition of scarce in economics: Object has a non-zero value in the market, is limited, and is desirable.
Rational behaviour - Comparing costs and benefits to maximise utility (satisfaction).
Marginal - Thinking in terms of per unit.

Opportunity cost - The cost of any good, service, or activity is the value of what must be given up to obtain it.

Rational self-interest entails making decisions to achieve maximum fulfilment of goals.
Different preferences and circumstances lead to different choices.
Rational self-interest is not the same as selfishness.
Decisions involve a change to current conditions, which is why actions are analysed marginally.
Options must weigh the marginal benefit against the marginal cost.
There is “no free lunch” and there can be “too much of a good thing.”
Many political problems have an economic aspect. For example, recent political problems revolve around balancing the budget, the tax system, welfare, international trade, and the environment.
Economic principles allow individuals and institutions to make more intelligent decisions.
Economists use the scientific method to establish theories, laws, and principles.

Theoretical economics - interpreting facts and observations in order to make principles and generalisations.

Terminology - Principles, laws, theories, and models are all terms that refer to generalisations about economic behaviour.

Ceteris paribus assumption - “Other things equal” In order to predict the effect a variable has on another variable, other interfering factors have to be constant. Similar in a science experiment where you only test one variable and keeping everything else constant.

Abstractions - Economic principles, theories, and models.

Graphical Expression - Economic relationships are quantitative (measurable using numbers, etc) so you can "demonstrate" ideas with a graph.
Economic policy - applies economic facts and principles to